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REGULATION OF 'RAILWAY RATES 

AND SERVICES. 

RELATION OF GOVERNMENT TO COMMERCE 

AND TRANSPORTATION. 






SPEECH 

OF 

HON. ROBERT M. LA FOLLETTE, 

OF WISCONSIN, 

IN THE 
Ik 

SENATE OF THE UNITED STATES, 
April 19, 20, and 21, 1906, 



AMENDMENTS TO STRENGTHEN THE RATE BILL 
OFFERED BY MR. LA FOLLETTE; 

THE ARGUMENTS AND VOTES UPON THE 

SAME IN THE SENATE OF THE 

UNITED STATES, 

May 9, 10, 11, 12, 14, and 18, 1906. 



6922 



WASHINGTON. 
1906. 



___ __^ _^^_ 



HE 2757 
ifoc 



TABLE OF CONTENTS. 

Government regulation of transportation — the right — the ob- 
ligation — the scope 6-17 

The power of Congress and the obligation to exercise it 5-6 

Constitutional arguments. against control unsound 6-8 

Power of the government inherent in sovereignty, not 

based on charter grants 8—12 

Supreme Court, the bulwark of the rights' of the Govern- 
ment 12-13 

" Limited " court review to prevent abuse of litigation 13-15 

Prohibition of preliminary injunction to expedite enforce- 
ment and promote justice . 15—17 

Historical review of Government regulation in the United 

States 1 17-33 

" Granger legislation " by the States 17-20 

Federal legislation to and including the act of 1887 20-22 

Railroads and trusts — Congressional investigations, 1875 

to 1893 22-23 

Failure of act of 1887 — maximum rate decision, 

1897 23 

Amendments recommended by Commission following aeci- 

sion, 1897 23-26 

Recommendations repeated from year to year but ignored 

by Congress 26-29 

President urges Congress to act 1901, 1904, 1905 29-30 

Industrial consolidation — railway competition eliminated- 30—33 

The Hepburn-Dolliver bill 34 

As measured by the demands of the country's commerce. 34-38 
Recommendations of Interstate Commerce Commission not 

heeded 38-41 

1. Valuation of railway property. 

2. Power to correct rates found to he unreasonabla 

or unjust. 

3. To control relation of rates. 

4. To control classification of freight. 

5. To fix a minimum rate. 

6. To prevent long and short. haul discriminations. 

7. To prevent withholding evidence before the Corn* 

mission. 

8. To protect passengers and employees from acci- 

dents. 

Other important omissions 41-44 

Imprisonment penalties — rebates and the Elkins Act 45-52 

Broad powers demanded — confidence in the Commission neces- 
sary 52-55 

Results of foreign regulation misstated 56-65 

Valuation of railway property vitally essential 65-78 

Demanded by the Supreme Coust 65-70* 

Recommended by the Interstate Commerce Commission 71 

Urged by National Convention of State Railroad Commis- 
sioners 71-72 

Value of property the true basis for reasonable rates 72-73 

Railway valuations by Michigan, Wisconsin, and Texas. 74-78 
Transportation charges grossly excessive and constantly ad- 
vancing 78-113 

Comparisons of unregulated rates with rates made under 

State control 80-82 

Wisconsin roads earn 6 per cent profit on over twice their 

true value 83 

Purchasers of " watered " stock not innocent 83-84 

Excessive charges always unlawful 85—88 

Recent enormous advances in freight charges 89-91 

Steadv advance in ton-mile rate — $100,000,000 on the 

business of 1904 91-92 

2 6922 



MAY 18 1907 
D. of D. 



3 

Transportation charges, etc. — Continued. 

Increased traffic, etc., call for reductions in rates .. 92-94 

Increased wages offset by increased traffic handled 94-97 

Overcapitalization— $8,000,000,000 "water" in railway 

stocks and bonds 97-104 

Millions for improvements provided by excessive profits 104-106 

True profits not known 106-107 

Present profits excessive 108-109 

Public donations for railway construction 110-113 

Conclusion 113-117 

Appendix — Table showing amounts expended from profits for 

betterments and improvements by several companies 118 

Amendments to strengthen the rate bill 119-148 

Long and short haul clause, yea-and-nay vote liH-lliO 

To restore imprisonment penalties, yea-and-nay vote 120-123 

To remove time limit on orders 123 

To counteract trick of withholding testimony, yea-and-nay 

vote 124-125 

Power to fix maximum rates and differentials 126-129 

• To disqualify certain Federal judges from determining rate 

cases, yea-and-nay vote 129-131 

To give the Commission the benefit of new evidence offered 

in court, yea-and-nay vote 131-133 

Providing for the valuation of railroads, yea-and-nay vote _ 133-141 

Providing for the block system 141-142 

Providing protection to railway employees, yea-and-nay 

vote 142-145 

Remarks of Mr. La Follette before the final vote on the bill, 

it will not settle rate question , 145-148 

6922 



SOME OF THE PROPOSITIONS DISCUSSED. 



The vital interest of organized society in commerce and the public 
nature of transportation imposes upon government the duty to maintain 
a control over transportation as a public service. 

******* 

It is the duty of government to require the carrier to render adequate 
services upon reasonable terms and upon equal terms. 

* * * * * * * 

In order to regulate rates and services government must possess 
powers of correction and control coextensive with the public-service 
corporations' power of abuse. 

******* 

The Hepburn-Dolliver bill will not solve the transportation problem. 
Unless greatly strengthened it will not meet the expectations of the 
country. It will not dispone of the question. 

******* 

I would not be unfair. The bill is not bad in its provisions, but 
weak because of its omissions. I do not believe that the bill is framed 
to meet the demand of " special interests." Nor has any broad con- 
sideration of public interest dominated its construction. It has neither 
ill intent nor high purpose. Expediency seems to have been the con- 
trolling factor in framing it. 

* * * * * ' * * 

On the day it is known that only the smallest possible measure of 
relief has been granted, the movement will begin anew all over the 
country for a larger concession to public right. That movement will 
not stop until it is completely successful. The only basis upon which it 
can be settled finally in a free country is a control of the public-service 
corporations, broad enough, strong enough, and strict enough to insure 
.i*£tice and equality to all American citizens. 

******* 

If a railroad corporation has bonded its property for an amount that 
exceeds its fair value, or if its capitalization is largely fictitious, it can 
not impose upon the public the burden of such increased rates as may 
he required for realizing profits upon such excessive valuation or ficti- 
tious capitajization. (United States Supreme Court.) 

* * * * * ' * * 

If a corporation can not maintain such a highway and. earn divi- 
dends for stockholders, it is a misfortune for it and them, which the 
Constitution does not require to be remedied by imposing unjust bur- 
dens upon the public. (United States Supreme Court.) 

******* 

We hold that the basis of all calculation as to the reasonableness of 

rates to be charged by a corporation maintaining a highway under 

legislative sanction must be the fair value of the property being used by 

it for the convenience of the public. (United States Supreme Court.) 

******* 

This great issue between the public and the railroads can be juggled 
with no longer. It can not be settled by legislation which palliates the 
wrong. It must be settled by getting the true value or fair value of 
railway property. If there is to be an end of antagonism and dissen- 
sion between the people and the transportation companies it can be 
found, sir, in no other way. 

******* 

The ascertainment of the value of the railroads is the very corner 
stone of any great and enduring service which this legislation is to 
accomplish for the people of this country. 

4 6922 



SPEECH 

OF 

HON. ROBEBT M. LA FOLLETTE. 



The Senate having under consideration the hill (H. R. 12987) to 
amend an act entitled "An act to regulate commerce," approved Febru- 
ary 4. 1887, and all acts amendatory thereof, and to enlarge the powers 
of the Interstate Commerce Commission — 

Mr. LA FOLLETTE said : 

Mr. President: The opponents of the regulation of railway 
rates and services have skillfully conducted this debate almost 
from the beginning upon constitutional grounds. This has pre- 
vented the Senate from giving consideration to the provisions of 
the bill and the abuses which call for correction. 

For many days the discussion has been confined to a con- 
sideration of the court procedure to test the orders of the Inter- 
state Commerce Commission. The importance of this branch 
of the subject will depend entirely upon the character of the 
orders which the Commission is authorized to make. The im- 
portance of any order issued will depend upon the power con- 
ferred and the duties imposed by law upon the Commission. 
The authority of the Commission may be so limited that the 
procedure for the enforcement of its orders will be relatively of 
little public importance. 

The scope of the bill will determine the importance of all 
orders and all court review. For these reasons, at the beginning 
of what I shall say to-day, I would bring the discussion back to 
the broadest consideration of the subject with which this bill 
proposes to deal. 

THE RELATION OF GOVERNMENT TO COMMERCE AND TRANSPORTATION. 

The commerce of a country is a measure of its material power. 
It is the product of all the labor and capital of the country — 
on the farms, in the mines, and factories, and shops, and every 
field of material production. 

The labor and capital of a country employed in production 
upon a basis attaining to the upbuilding of any community is 
everywhere absolutely dependent on transportation. 

The founders of this Government understood that commerce 
is vital to organized society ; that the development of the 
country depends upon the ready exchange of commodities be- 
tween its different communities and sections. And so they 
ordained that commerce should be free between the States. 

The founders of the Government and those who followed 
them understood that transportation is properly a function of 
government, and so they built highways, and turnpikes, and dug 
canals, and improved rivers and harbors, and finally built State 
railroads and aided in the building of interstate railroads. 
These highways by land and water were paid for wholly or in 
part out of the public treasury and the public domain. 

6922 5 



SOME OF THE PROPOSITIONS DISCUSSED. 



The vital interest of organized society in commerce and the public 
nature of transportation imposes upon government the duty to maintain 
a control over transportation as a public service. 

******* 

It is the duty of government to require the carrier to render adequate 
services upon reasonable terms and upon equal terms. 

* * * • * * * 

In order to regulate rates and services government must possess 
powers of correction and control coextensive with the public-service 
corporations' power of abuse. 

******* 

The Hepburn-Dolliver bill will not solve the transportation problem. 
Unless greatly strengthened it will not meet the expectations of the 
country. It will not dispo>e of the question. 

******* 

I would not be unfair. The bill is not bad in its provisions, hut 
weak because of its omissions. I do not believe that the bill is framed 
to meet the demand of " special interests." Nor has any broad con- 
sideration of public interest dominated its construction. It has neither 
ill intent nor high purpose. Expediency seems to have been the con- 
trolling factor in framing it. 

* * * * * ' * * 

On the day it is known that only the smallest possible measure of 
relief has been granted, the movement will begin anew all over the 
country for a larger concession to public right. That movement will 
not stop until it is completely successful. The only basis upon which it 
can be settled finally in a free country is a control of the public-service 
corporations, oroud enough, strong enough, and strict enough to insure 
i*f,tice and equality to all American citizens. 

******* 

If a railroad corporation has bonded its property for an amount that 
exceeds its fair value, or if its capitalization is largely fictitious, it can 
not impose upon the public the burden of such increased rates as may 
he required for realizing profits upon such excessive valuation or ficti- 
tious capitajization. (United States Supreme Court.) 

* * * * * ' * * 

If a corporation can not maintain such a highway and. earn divi- 
dends for stockholders, it is a misfortune for it and them, which the 
Constitution does not require to be remedied by imposing unjust bur- 
dens upon the public. (United States Supreme Court.) 

******* 

We hold that the basis of all calculation as to the reasonableness of 
rates to be charged by a corporation maintaining a highway under 
legislative sanction must be the fair value of the property being used by 
it for the convenience of the public. (United States Supreme Court.) 

******* 

This great issue between the public and the railroads can be juggled 
with no longer. It can not be settled by legislation which palliates the 
wrong. It must be settled by getting the true value or fair value of 
railway property. If there is to be an end of antagonism and dissen- 
sion between the people and the transportation companies it can be 
found, sir, in no other way. 

******* 

The ascertainment of the value of the railroads is the very corner 
stone of any great and enduring service which this legislation is to 
accomplish for the people of this country. 

4 6922 



SPEECH 

OF 

HON. ROBERT M. LA EOLLETTE. 



The Senate having under consideration the hill (H. R. 12987) to 
amend an act entitled "An act to regulate commerce," approved Febru- 
ary 4. 1887, and all acts amendatory thereof, and to enlarge the powers 
of the Interstate Commerce Commission — 

Mr. LA FOLLETTE said : 

Mr. President: The opponents of the regulation of railway 
rates and services have skillfully conducted this debate almost 
from the beginning upon constitutional grounds. This has pre- 
vented the Senate from giving consideration to the provisions of 
the bill and the abuses which call for correction. 

For many days the discussion has been confined to a con- 
sideration of the court procedure to test the orders of the Inter- 
state Commerce Commission. The importance of this branch 
of the subject will depend entirely upon the character of the 
orders which the Commission is authorized to make. The im- 
portance of any order issued will depend upon the power con- 
ferred and the duties imposed by law upon the Commission. 
The authority of the Commission may be so limited that the 
procedure for the enforcement of its orders will be relatively of 
little public importance. 

The scope of the bill will determine the importance of all 
orders and all court review. For these reasons, at the beginning 
of what I shall say to-day, I would bring the discussion back to 
the broadest consideration of the subject with which this bill 
proposes to deal. 

THE RELATION OF GOVERNMENT TO COMMERCE AND TRANSPORTATION. 

The commerce of a country is a measure of its material power. 
It is the product of all the labor and capital of the country — 
on the farms, in the mines, and factories, and shops, and every 
field of material production. 

The labor and capital of a country employed in production 
upon a basis attaining to the upbuilding of any community is 
everywhere absolutely dependent on transportation. 

The founders of this Government understood that commerce 
is vital to organized society ; that the development of the 
country depends upon the ready exchange of commodities be- 
tween its different communities and sections. And so they 
ordained that commerce should be free between the States. 

The founders of the Government and those who followed 
them understood that transportation is properly a function of 
government, and so they built highways, and turnpikes, and dug 
canals, and improved rivers and harbors, and finally built State 
railroads and aided in the building of interstate railroads. 
These highways by land and water were paid for wholly or in 
part out of the public treasury and the public domain. 

6922 5 



6 

The vital interest of organized society in commerce and the 
public nature of transportation imposes upon government the 
duty to maintain a control over transportation as a public 
service. Hence upon the broadest ground of public policy, 
wholly apart from any power to control, dependent upon charter 
grants, government must exercise, as a sovereign right, abso- 
lute authority over all persons and all property engaged in 
transportation. 

The public character of the transportation service and the 
inherent right in sovereignty to exercise control over it, im- 
poses upon the Government the obligation to require the com- 
mon carrier to render the service upon reasonable terms and 
upon equal terms. For the Government to fail in this duty, 
for it to turn over to railroad corporations the uncontrolled 
right to dictate the terms of service and its character, is to 
abandon a function of government and place the common car- 
rier in the control of the commerce of the country. To permit 
the railroads to control the commerce of the country is, in the 
final analysis, to permit the railroads to control the country. 

I maintain, then, that the authority of government to con- 
trol transportation, both as to the character of the service and 
the rate of the service, is inherent as a right of sovereignty and 
that the obligation rests upon government to exercise this 
power. 

I shall undertake now to show that the adjudicated cases 
fully sustain this contention. 

OBVIOUSLY UNSOUND CONSTITUTIONAL ARGUMENTS. 

The history of the effort of the States and of the United 
States to regulate commerce, like other questions of great mo- 
ment when there is conflict of views, is associated with the 
struggle over the constitutionality of each advance step that 
has been taken. 

In the framing of a great piece of legislation it is impossible 
to overestimate the importance of all sincere effort to insure 
its constitutionality and to make it conform to the decisions of 
the Supreme Court. But there is a distinction in such legal 
discussion that should be kept clearly in mind. There is 
always the effort of the friends of a measure to insure its 
standing the test of the courts, and there is sometimes a deter- 
mined effort of opponents to defeat it by attacking is constitu- 
tionality. 

The measure before us has been described as " drastic " and 
11 revolutionary ; " as " contrary to the spirit of our institu- 
tions ; " as " raising some of the most important questions with 
which we have had to deal since the civil war." It has been 
suggested that it owes its origin to " public clamor," and that 
it never commanded any serious attention until the President 
mentioned it in his message. Yet it is quite significant that 
the fight against the bill has been over constitutional questions. 
No Senator has taken the floor of the Senate in open opposition 
to the regulation of railroad transportation. 

In the discussion of constitutional questions well-wrought-out 
theories have been substituted for the settled conclusions of 
law, as declared in the great body of decisions rendered on 
these questions since the adoption of the Constitution. Argu- 
ments have been made in opposition to this legislation that have 
been rejected again and again by the Supreme Court, and de- 
clared not to be the law in a long line of undisturbed decisions. 
692Ji 



It has been contended that rate making was not in the mind 
of the framers of the Constitution, and therefore the Constitu- 
tion can have no application to it, in direct contradiction of 
the decision in the Dartmouth College case, where it was held, 
and has never been successfully controverted since, that — 

The case being within the words of the law must be within its opera- 
tion likewise. 

By the new standard now sought to be set up, the four- 
teenth amendment would apply only to negroes, since they were 
the only persons in mind when the amendment was framed. 
Likewise, the fifth amendment would not apply to corporations, 
since only natural persons were meant, as frequently asserted 
by the courts. The stress placed upon the argument that com- 
mon carriers could not charge unreasonable rates at common 
law would, if carried to its logical conclusion, prove that all 
the progressive legislation, State and Federal, for the con- 
trol of transportation was entirely unnecessary and could as 
well be wiped off the statute books. 

The argument on the clause, " No preference shall be given 
by any regulation of commerce or revenue to the ports of 
one State over those of another," assumes, in direct opposition 
to repeated decisions, that the Commission must adopt a rate 
of so much per ton per mile as a reasonable rate. 

Moreover, the discussion of this provision of the Constitution 
presumes that the railroads are conducting their business in 
direct violation of the intent and spirit of this clause of the 
Constitution. The moral obligation of the Government to exer- 
cise its power to prevent such violation is entirely ignored. 

Taking the construction of the Constitution contended for by 
those who make this argument, is there not, then, an obliga- 
tion on the part of the Federal Government, under any rational 
interpretation of the true meaning and spirit of this delegation 
of power, not only to give no preference, but to see that no 
preference is given? The States surrender all their commerce 
and all their power of regulation over it to the General Gov- 
ernment, subject to the stipulation that in the exercise of that 
power no preference should be given to any power. Ought not 
the Government to protect the commerce of the States which 
have lost the right to protect it themselves? Ought not the 
Government to see to it that the transportation companies, 
over which the States have no control, which the Government 
alone can regulate, shall not do the very thing which the States 
expressly stipulated should not be done by the Government? 

If the Federal Government permits a third party, subject to 
control by no one but the Federal Government, to do the very 
thing which it was expressly forbidden to do, is it not, in fact, 
doing the forbidden thing itself? Is it not, in effect, a violation 
of the spirit of this very provision of the Constitution for the 
Federal Government to allow the railway companies to give 
preference to the ports of one State over another by parceling 
out its commerce to suit themselves? 

The contention that the power to regulate interstate com- 
merce is identical with the power to regulate foreign commerce ; 
that most of our foreign commerce is carried in foreign ships ; 
that we can not regulate foreign ships; therefore we can not 
regulate nor prescribe the rates of railroads doing business in 
the United States, these and many other like arguments heaijl 
in this debate demonstrate the spirit of much of the constitu- 
6922 



8 

tional discussion and opposition to the control of railway rates. 
Evidently the concluding paragraph of Mr. Justice Marshall's 
great opinion in Gibbon v. Ogden is as significant to-day as 
when delivered years ago : 

Powerful and ingenious minds * * * may, by a course of well- 
digested and metaphysical reasoning * * * explain away the Con- 
stitution of our country and leave it a magnificent structure, indeed, 
to look at, but totally unfit for use. This may so entangle and perplex 
the understanding as to obscure principles which were before thought 
quite plain, and induce doubts where, if the mind were to pursue its 
own course, none would be perceived. 

POWER OF UNITED STATES OVER INTERSTATE COMMERCE SAME AS POWER 
OF STATES OVER STATE COMMERCE. 

In the long conflict between the States and the corporations 
the railroads have resisted, step by step, the inevitable con- 
clusion of law that the State can fix the rates of transportation. 

What the railroad corporations most dread in this contest 
to-day is that Congress shall assert the same right for the- 
National Government to fix the rate for interstate commerce 
that the States exercise over State traffic. If it is admitted that 
Congress has the same power over interstate" commerce that the 
States have over State commerce, there is no ground for fur- 
ther litigation. Such an admission would sweep away all op- 
portunity for long legal controversy. It would settle the issue. 

The Senator from Ohio [Mr. Foraker] says : 

The assumption that Congress has the power to fix rates as a part 
of the power to regulate commerce is largely due to the fact, no doubt, 
that the States undeniably have this poicer. 

It follows that his contention that Congress has not the power 
to fix rates fails absolutely if the power of the United States 
Government over interstate commerce is the same as the power 
of State governments over State commerce. 

The Senator from Pennsylvania [Mr. Knox] speaks of " dif- 
ference in radical relation of the States and of the nation to 
the subject of rate making." 

It becomes very important to definitely determine, if pos- 
sible, whether the power of the United States over interstate 
commerce is the same as the power of a State over State com- 
merce. 

In the case of Gibbon v. Ogden Mr. Justice Johnson, cited by 
the Senator from Ohio as authority for his position, said (p. 
225) : 

The " power to regulate commerce " here meant to be granted, was 

• that power to regulate commerce which previously existed in the States. 

But what was that power ? The States were, unquestionably, supreme : 

and each possessed that power over commerce, tchich is acknowledged 

to reside in every sovereign State. 

And again (same page) : 

The history of the times will, therefore, sustain the opinion, that the 
grant of power over commerce, if intended to be commensurate with the 
evils existing, and the purpose of remedying those evils, could be only 
commensurate with the poicer of the States over the subject. 

Chief Justice Marshall said, in his opinion of this case (p. 
195) : 

The completely internal commerce of a State, then, may be considered 
as reserved for the State itself. 

Plainly implying that all other power was conferred upon 
Congress, the sovereign power which existed in Parliament, and 
6922 



•the federation passed to the National Government. Nor does 
he stop with this plain inference. He expressly states (p. 195) : 

If, as has always been understood, the sovereignty of Congress, 
though limited to specified objects, is plenary as to those objects, the 
power over commerce with foreign nations and among the several 
States is vested in Congress as absolutely as it would be in a single 
government, having in its constitution the same restrictions on the 
exercise of the power as are found in the Constitution of the United 
States. The wisdom and the discretion of Congress, their identity 
with the people, and the influence which their constituents possess at 
elections are, in this, as in many other instances, as that, for example, 
of declaring war, the sole restraints on which they have relied to se- 
cure them from its abuse. They are the restraints on which the 
people must often rely, solely, in all representative governments. 

In McCulloeh v. Maryland (4 Wheaton, p. 405) Chief Justice 
Marshall says : 

If any one proposition could command the universal consent of man- 
kind, we might expect it would be this — that the Government of the 
Union, though limited in its powers, is supreme within its sphere of 
action. 

And further (p. 410) : 

In America the powers of sovereignty are divided between the Gov- 
ernment of the Union and those of the States. They are each sovereign 
with respect to the objects committed to it, and neither sovereign with 
respect to the objects committed to the other. 

In Brown v. Maryland (12 Wheaton, 446) he said: 

Those who felt the injury arising from this state of things, and those 
who were capable of estimating the influence of commerce oh the prop- 
erty of nations perceived the necessity of giving the control over this 
important subject to a single government. * * * It is not, there- 
fore, a matter of. surprise that the grant should be as extensive as the 
mischief, and should comprehend all foreign commerce and all commerce 
among the 8tates. 

These basic principles upon which the authority of our Gov- 
ernment rests, have all been cited again and again by our Su- 
preme Court, whenever questions involving the right of Con- 
gress to regulate commerce have arisen. 

Justice Harlan, in the Northern Securities case, after quot- 
ing the principle laid down by Justice Marshall in Gibbon v. 
Ogden, saying it had never been modified by subsequent deci- 
sion, inquires (p. 341) whether there is any escape from the 
conclusion that — 

The power of Congress over interstate and international commerce is 
as full and complete as is the power of any State over its domestic 
com merce. 

Justice White, in his dissenting opinion in this same case, 
says (p. 339) : 

It can not be denied that the sum of all just governmental power was 
enjoyed by the States and the people before the Constitution of the 
United States .was formed. None of the power was abridged by that 
instrument, except as restrained by constitutional safeguards, and hence 
none was lost by the adoption of the Constitution. The Constitution, 
whilst distributing the preexisting authority, preserved it all. 

He says further in this case : 

The right, of Congress to regulate to the fullest extent, to fix the 
rate to be charged for the movement of interstate commerce, and to 
exert any power that flows from the Constitution is conceded. 

So much has been said of a parenthetical remark by Mr. 
Justice Harlan in the Northern Securities case, that I feel war- 
ranted in taking time for an explanation which I believe an 
analysis of the opinion in the case will fully justify. In the 
first place the conclusion drawn from the interpolated sentence 
is contrary, not only to the citation just made, but to the whole 
692^ 



10 

tenor of Justice Harlan's reasoning on the power of Congress to 
regulate. 

While widely differing as to other legal questions involved, 
Justices Harlan and White agree perfectly as to the funda- 
mental power of Congress. 

Mr. Justice Harlan argues that if a State may strike at com- 
binations in restraint of trade within its exclusive jurisdiction, 
Congress has the power to protect interstate commerce against 
such combinations. Mr. Justice White no less emphatically as- 
serts that the right of Congress is conceded to regulate to the 
fullest extent, to fix the rate to be charged for the movement of 
interstate commerce, and to exert every power that flows from 
the authority of the Constitution. 

But on the other points in the case the two learned judges 
widely differ. If, instead of reading in cold type, their contend- 
ing opinions, we imagine ourselves in the consultation room, we 
get new light on an apparent discrepancy. Justice Harlan 
says — I quote from his opinion : 

Indeed, if the contentions of the defendants are sound, why may not 
all the railway companies in the United States that are engaged under 
State charters in interstate and international commerce enter into a 
combination as the one here in question, and by the device of a hold- 
ing corporation obtain the absolute control throughout the entire coun- 
try of rates for passengers and freight beyond the power of Congress to 
protect the public against their exactions? The argument in behalf of 
the defendants necessarily leads to such results, and places Congress, 
although invested by the people of the United States with full authority 
to regulate interstate and international commerce, in a condition of 
utter helplessness, so far as the protection of the public against such 
combinations is concerned. 

Justice White replies — I quote from his opinion : 

With the full power of the States over corporations created by them 
and with their authority in respect to local legislation and with power 
in Congress over interstate commerce, carried to its fullest degree, I can 
not conceive that if these powers admittedly possessed by both be fully 
exerted, a remedy can not be provided fully adequate to suppress evils 
which may arise from combinations deemed to be injurious. This must 
be true, unless it be concluded that by the effect of the mere distribu- 
tion of power made by the Constitution partial impotency of govern- 
mental authority has resulted. 

Obviously meaning that the fixing of the rates would suppress 
the evils complained of in the discussion. 

Justice Harlan answers — quoting again from his opinion : 

Will it be said that Congress can meet such emergencies by prescrib- 
ing the rates by which interstate carriers shall be governed in the 
transportation of freight and passengers? If Congress has the power 
to fix such rates — and upon that question we express no opinion — it 
does not choose to express its power in that xoay or to that extent. It 
has, all will agree, a large discretion as to the means to be employed in 
the exercise of any power granted to it. For the present it has deter- 
mined to go no further than to protect the freedom of commerce among 
the States and with foreign States by declaring illega* all contracts, 
combinations, conspiracies, or monopolies in restraint of such com- 
merce, and make it a public offense to violate the rule thus prescribed. 
How much further it may go we do not now say. We need only at this 
time consider whether it has exceeded its power in enacting the statute 
here in question. 

Taken in connection with the context, it is in accordance with 
the spirit, the reasoning, and the language of the great opinion 
to interpret the parenthetical remark to mean that if Congress 
has the power to fix such rates — as it undoubtedly has, but the 
question not being in issue we express no opinion — it does not 
choose to exercise its power in that way or to that extent. 
This view is sustained by — 
6922 



11 

How much further it may go we do not now say. We need only at 
this time consider whether it lias exceeded its powers in enacting this 
poiver here in question. 

While it has no relevancy to the legal merits of the case, it 
may be worth while to notice in passing that Justice Harlan at 
another point makes a similar parenthetical remark in the 
course of his argument. On page 351 he says : 

But if nothing more can be said than that Congress has erred — and 
the court must not be understood as saying that it has or has not 
erred — the remedy for the error and the attendant mischief is the 
selection of new Senators and Representatives, who, by legislation, will 
make such changes in existing statutes as may he demanded by their 
constituents and be consistent with law. 

On page 337 he says : 

Undoubtedly there are those who think that the general business in- 
terests and prosperity of the country will be best promoted if the rule 
of competition is not applied. But there are others who believe that 
such a ruje is more necessary in these days of enormous wealth than it 
ever was in any former period of history. 

One almost feels warranted in believing the court did not 
think Congress had erred in spite of the parenthetical reserva- 
tion. No more do I believe he thought or meant to say that the 
power of Congress to fix rates was an open question. 

EIGHT TO FIX RATES NOT DEPENDENT ON FRANCHISE. 

It is true that the States have emphasized the franchise as 
warrant and justification for the regulation of rates. 

But the Supreme Court of the United States has decided that 
the right to regulate does not originate in the right to charter, 
but rests upon the broad principle that when property is de- 
voted to public use it is subject to control in the public interest. 
Chief Justice Waite, in Munn v. Illinois (94 U. S. 113), after a 
thorough review of English and American authorities, settled be- 
yond controversy that property devoted to public service was 
from the nature of the business subject to Government control. 

In Chicago, Burlington and Quincy Railway Company v. Iowa 
(94 U. S., p. 161) Chief Justice Waite directly and explicitly 
applies the rule laid down in Munn v. Illinois to railroad rate 
regulation: 

Railroad companies are carriers for hire. They are therefore en- 
gaged in a public employment affecting the public interest, auu u^avsr 
the decision in Munn v. Illinois (supra, p. 113) subject to legislative 
control as to their rates of fare and freight, unless protected by their 
charters. 

In Piek v. Chicago (94 U. S., p. 17G) : 

In Munn v. Illinois (supra, p. 113) and Chicago, Burlington and 
Quincy Railway Company v. Iowa (supra, p. 155) we decided that the 
State may limit :the amount of charges by railroad companies for fares 
and freights, unless restrained by some contract in the charter. 

The power of Congress, therefore, to fix rates of fare and 
freight extends to all interstate commerce. It is not limited to 
the railroad it has incorporated. On the other ha»d, the only 
possible legal escape from regulation is in the case of roads that 
may have secured specific exemption from regulation under 
charters granted by the Government. The Supreme Court of 
the United States has decided that Congress has the same power 
over interstate commerce that the States have over State com- 
merce. It has decided that the States can fix rates through a 
commission. What the States can do in regulating State traf- 
fic Congress can do in regulating interstate traffic. 
6922 



12 

The right to fix the rate is not, as has been assumed in this 
discussion, an extension of the power to regulate commerce. It 
is included in, and inseparable from, the power to insure rea- 
sonable rates. It is the means to an end. A rate is compensa- 
tion for service. There is no difference in principle in fixing a 
maximum, a minimum, or an absolute rate. The fixing of the 
rate is but a corollary to the power to insure reasonable rates. 

SUPREME COURT DECISIONS PRESERVE FUNDAMENTAL RIGHTS OF 
GOVERNMENT. 

Corporate interests have little reason to expect aid and com- 
fort from the Supreme Court. The opinion by Mr. Justice White 
in the Coal case, delivered in February, that by Mr. Justice Har- 
lan in the Chicago Corporation cases, in March, and the opinion 
by Mr. Justice Brewer in the Michigan Tax case, rendered within 
a few days, are opportune illustrations of the conservation by the 
Supreme Court of the inherent rights of the people against the 
encroachment of corporate power. To the. great honor of the 
court and to the preservation of Government, this final tribunal 
remains as unsullied and ideal to-day as whan created by the 
Constitution. The great interests have not hesitated to corrupt 
legislation and propose its attorneys for judicial appointment, 
but its taint has never reached the Supreme Court of the United 
States. 

Our system of courts is complicated. Decisions are numer- 
ous. The wisest men differ; sometimes err. Language can 
not be used so perfectly that misunderstanding may not arise as 
to its meaning. Even when principles of law have been well 
established there always remain isolated cases that can be cited 
to prove conflict of authority. 

But, as has been ably shown in this debate, the long line of 
authoritative decisions by our Supreme Court in epoch-making 
cases, arising out of rate regulation for the past thirty-odd 
years, have been consistent and unwavering in the application 
of fundamental principles for the preservation of which our 
Government was founded. 

More progress has been made through the court decisions 
than by specific legislation. The overbalancing control of State 
and national legislatures by public-service corporations has 
often resulted in weak laws. But the Supreme Court, in de- 
ciding questions arising under these laws, has settled important 
constitutional rights. The decisions furnish a solid basis upon 
which to legislate at this time. 

The people have no need to fear the final judgment of the 
Supreme Court. Indeed, they have every reason to seek the 
final adjudication of questions involving public rights by our 
highest court. Again and again it has interposed the strong 
arm of the law between the people and the unlawful encroach- 
ment of corporate power. 

When in the early seventies the struggle between the States 
and the railroads culminated in the so-called " Granger " legis- 
lation, it was the courts that rebuked the corporations for tram- 
pling on the rights of the people, and in language never to be 
forgotten illuminated this whole question. They showed that 
the great movement was not, as the Senator from Massachusetts 
[Mr. Lodge] has described this legislation to be — the result of 
" public clamor " nor " sporadic excitement " — but that it was 
an uprising against abuse of power, and was based upon fun- 
damental rights. 
6922 



13 

In the Attorney-General v. The Railroad Companies (35 Wis- 
consin, 580), Chief Justice Ryan said: 

We listened to a great deal of denunciation of chapter 273 which, we 
think, was misapplied. We do not mean to say that the act is not 
open to criticism. We only say that such criticism is unfounded. It 
was said that its provisions which have heen noticed were not within 
the scope of the legislative function ; as if every compilation of stat- 
utes, everywhere, in all time, did not contain provisions limiting and 
regulating tolls; as if the very franchise altered were not a rebuke to 
such clamor. It was repeated, with a singular confusion of ideas and 
a singular perversion of terms, that the provisions of the chapter 
amount to an act of confiscation ; a well-defined term in the law, sig- 
nifying the appropriation by the State, to itself, for its own use, as 
upon forfeiture, the whole thing confiscated. It was denounced as 
an act of communism. We thank God that communism is a foreign 
abomination without recognition or sympathy here. The people of 
Wisconsin are too intelligent, too staid, too just, too busy, too pros- 
perous for any such horror of doctrine ; for any leaning toward confis- 
cation or communism. And these wild terms are as applicable to a 
statute limiting the rates of toll on railroads as the term " murder " is 
to the surgeon's wholesome use of the knife to save life, not to take it. 
Such objections do not rise to the dignity of argument. They belong to 
that order of grumbling against legal duty and legal liability which 
would rail the seal ftom off the bond. 

And again, referring to the claim that the legislation was the 
result of passion, he said, if there be anger — 

It is rather of the nature of parental anger against those spoiled 
children of legislation, as our statute books abundantly show them to 
be, icho, after some quarter of a century of legislative favors, lavishly 
showered upon them, unwisely mutiny against the first serious legis- 
lative restraint they have met. 

In 1876 Chief Justice Waite, in Munn v. Illinois and the 
Granger cases, made secure to the people the fundamental prin- 
ciple that " when property is devoted to public use it is subject 
to public regulation." 

The spirit in which the courts administered the responsibility 
laid upon them in these cases is well expressed by Justice Waite 
in the closing words of his decision : 

In passing upon the case we have not been unmindful of the vast 
importance of the questions involved. This and cases of a kindred 
character were argued before us more than a year ago by most eminent 
counsel, and in a manner worthy of their well-earned reputations. We 
have kept the cases long under advisement in order that their decision 
might be the result of our mature deliberation. 

From the decision of those cases to the present time the trend 
of the interpretation, and of the application of the law by the 
courts of last resort to the multitude of cases that have arisen, 
has been a distinct gain for popular rights. 

" BROAD " COURT REVIEW. 

It should be remembered that effort to limit the jurisdiction 
of the courts within the constitutional right to limit is not an 
expression of distrust of the final adjudication of corporation 
questions by the Supreme Court. 

The appointment of judges of the inferior courts upon the 
recommendation of United States Senators as a part of the 
ordinary official patronage is bad in principle, and one which 
has not been without occasional bad results. Where judges have 
been identified with corporate interests previous to their appoint- 
ment upon the bench there is danger of bias in judgment, even 
tfeough motives may not be questioned. With the great awaken- 
ing to the dangers that threaten representative government 
through corporate influence, there undoubtedly exists some un- 
easiness as to whether even the sacred tribunals of justice have 

6922 



14 

entirely escaped the entangling net of the " system " from which 
the nation is struggling to free itself. 

Nevertheless, it is not the fear of the direct or indirect cor- 
ruption of the courts that constitutes the primary motive back 
of this effort to limit the jurisdiction of the courts. It is fear 
of the abuse of the right of litigation. 

It is common knowledge that whenever any legislation affects 
railroad interests — no matter how just and righteous it may 
be — they convert the machinery of the law into an instrument 
to defeat the purpose of the law. 

Mr. President, I hope I am not prejudiced against any inter- 
ests involved in legislation. The first duty of a legislator is to 
free his judgment from bias. I trust that long contention with 
the forces this legislation aims to control has not warped my 
standard. The organized wealth of this country is aggressive. 
It is unscrupulous. No power other than that of the Govern- 
ment can cope with it. I believe the existence of government — ■ 
real, representative government for the people — is at stake. 
The sovereign right conferred on Congress to regulate commerce 
is the vantage ground in the struggle. 

No matter how great the burden, how grievous the wrong, no 
State can go outside its boundaries to exercise the sovereign 
right to protect its citizens from tyranny of transportation com- 
panies. Even within their own boundaries the States are seri- 
ously handicapped by the constitutional limitations respecting 
State and interstate commerce, as everyone well knows who 
has attempted to do anything with the State problem. 

The great bulk of commerce is interstate. The National Gov- 
ernment has the exclusive power to regulate interstate com- 
merce. It has the responsibility that goes with the power. 
Shall Congress use it freely, courageously, or timidly, cring- 
ingly, ineffectively? 

The Supreme Court has decided that the Constitution fixes 
a limitation upon the power of Congress to establish rates. 
The fifth amendment provides that private property shall not 
be taken for public use without just compensation. The consti- 
tutionality of the orders of the Commission can always be 
tested on this ground, regardless of any express provision in the 
law to that effect. 

Legally, it is as needless to provide that carriers may appeal to 
the courts to test the constitutionality of a law affecting their 
interests as it would be to add that provision to each and every 
law that passes Congress. The question of providing a so- 
called " broad court review " has resolved itself into one of 
public policy. Shall Congress expressly or impliedly extend 
to the carriers greater privileges of litigation than the Constitu- 
tion guarantees them, or shall Congress limit their opportunity 
of litigation in so far as the Constitution permits? 

Why should Congress provide that the railroads shall have 
the right to appeal from the rate established by the Commission 
on any other than constitutional grounds? Is not the provision 
that their property shall not be taken without just compensation 
sufficient protection? Does any man fear the precedent? Is it 
not the same test that the private citizen must abide when the 
railroad, by the authority conferred on it by the State, takes 
his home, without regard to its precious associations, and 
awards him only just compensation? 
6922 



15 

Does any man fear that limiting railroad companies to their 
constitutional rights will work them any wrong? Consider that 
Congress might itself fix a schedule of rates and prescribe 
specific regulations. What does it do instead? It creates a 
Commission. The Interstate Commerce Commission is ap- 
pointed by the President. It is confirmed by the Senate. It is 
charged with great responsibility and great power. It must be 
assumed that the President In appointing, and the Senate in 
confirming, will exercise great care* Their selection will be 
made with the same singleness of purpose with which the Su- 
preme Court of the United States is chosen. Integrity, ability, 
fitness will be the consideration. 

The members of the Commission, by the terms of the act, give 
all their time exclusively to the study of this single complex 
problem. They acquire expert knowledge. They reach definite 
well-grounded conclusions as to what constitutes reasonable 
rates and just practices in transportation. They are as conscien- 
tious as any court would be in the discharge of the duties as- 
signed. Their judgment when finally reached is as deliberate, 
unbiased, and disinterested as that of any court. It is their 
duty to insure reasonable and just transportation rates to the 
public and to prevent unfair and discriminatory charges. That 
would be the duty of the court likewise. But the Commission 
presumably has a very much broader knowledge and deeper 
insight into the determining facts than any court could acquire 
in the course of a brief trial. 

The Commission and the courts should complement each 
other. The Commission is the tribunal of the facts ; the courts 
of the law. The Commission must always have consideration of 
the law in its application to facts. The courts must, of course, 
consider facts in the application of the law ; but it is in the 
public interest that the judgment of the Commission on the facts 
should be final where possible. 

There should be no unnecessary complexity in the solution 
of a great problem. There should be intelligent and economic 
division of work. The courts review the laws made by Con- 
gress to test their constitutionality. The Supreme Court has 
repeatedly said it does not pass upon the wisdom of laws. 

The Commission may err. The judgment of the wisest, most 
conscientious, and most expert man is not always infallible. 
The conclusions of the court are not al\^ays infallible. But 
we must abide by them. For generations of time the judgment 
of juries as to facts has been accepted as final. How much 
more reliable the judgment of expert commissioners of the 
same high character and standing as the court. When the 
plain citizen must abide the verdict of the jury as to the facts, 
can it be seriously contended that the corporations should be 
accorded the privilege of having the facts adjudged by an ex- 
pert commission tried over again in the courts? Is not their 
constitutional right a sufficient guaranty that they wiW not 
suffer serious wrong? 

Does any man honestly believe the corporations are clamoring 
for a broad review in the interest of justice? Would they care 
for the privilege except as it gives opportunity for the endless 
delays of litigation that tend to defeat substantial justice? 

PRELIMINARY INJUNCTION. 

Within the past ten days the Senator from Texas [Mr. Bailey] 
has made an argument that will be memorable in history- It is 
6922 



16 

generally conceded that the adoption of his proposed amendment 
is no longer a constitutional question. It is now before the 
Senate as a question of public policy. 

The acceptance of this amendment and the rejection of the 
proposition of a broad court review have the same sound basis. 

The common-law right to preliminary injunction was to pre- 
vent " irreparable injury." The creation of a commission of 
this high order to investigate the subject and decide upon rates 
with the same deliberate judgment exercised by a court, pre- 
cludes the necessity of this procedure. 

There is much less danger of railroad companies suffering 
from the decisions of the Commission than of the shippers being 
wronged by the action of the court that grants the prelim- 
inary injunction. The order of the Commission is reached after 
full consideration of all the facts ; that of the court for pre- 
liminary injunction is the judgment of one judge upon affidavit 
by an interested party. 

I would not, in dealing with corporations, establish any prece- 
dent that might not be safely applied to protect the property 
rights of any citizen. But I would not be more careful, more 
cautious, more timid in dealing with corporations than in 
dealing with individuals. It has seemed to me that some who 
have spoken for this legislation have been too much on the 
defensive. They have been more eloquent and enthusiastic 
over their anxiety to defend the corporate interests from all 
harm than over their desire to frame a law that will bring 
railroad corporations back to their plain duties as common car- 
riers, and protect the people from the existing intolerable 
abuses in transportation. 

Prohibiting the use of preliminary injunction will enhance 
the value of this legislation beyond all computation. The 
operation of the law will be simplified and justice promoted. 

To cut out this much-abused process will not confer auto- 
cratic power upon the Commission. Indeed, it will not in any- 
wise affect the power of the Commission. It will put upon the 
railroad companies the burden of hastening instead of delaying 
the final judgment of the court if they are sincerely seeking to 
secure justice. 

Mr. President. I pause in my remarks to say this. I can not 
be wholly indifferent to the fact that Senators by their absence 
at this time indicate their want of interest in what I may have 
to say upon this subject. The public is interested. Unless this 
important question is rightly settled seats now temporarily va- 
cant may be permanently vacated by those who have the right 
to occupy them at this time. [Applause in the galleries.] 

Mr. KEAN. Mr. President, I rise to a question of order. 

Mr. LA FOLLETTE. I do not ask to have Senators called 
back here who feel no interest in what I have to say. I know 
that the country will take interest in the discussion that I shall 
make of the defects in this proposed legislation. 

The PRESIDING OFFICER (Mr. Long in the chair). The 
Senator from Wisconsin will suspend. 

Mr. KEAN. I rise to a question of order. 

The PRESIDING OFFICER. The Senator from New Jersey 
will state his question of order. 

Mr. KEAN. I ask that the rules of the Senate be enforced, 
and that the galleries be cleared. 
6922 



17 

The PRESIDING OFFICER. The Presiding Officer will ad- 
monish the occupants of the galleries, that it is contrary to the 
rules of the Senate to express approval or disapproval of any 
remarks that may be made, and upon a recurrence of it the gal- 
leries will be ordered cleared. 

HISTORY OF THE MOVEMENT. 

Mr. LA FOLLETTE. Partisan politics should have no place 
in our discussion of this measure. It should influence no man's 
action. The question with which we are dealing goes too deeply 
into the life of the people of this country and the integrity of 
their Government to permit a single page of the record we are 
making to be stained with party strife for party advantage. 

That this bill is before Congress to-day goes to the credit of 
no party, no platform, no man. It is here because the subject 
with which it purports to deal can no longer be suppressed. 
The principle back of this bill is not new. It was written in 
the Constitution in the beginning and asserted as a legislative 
power by four States in the upper Mississippi Valley more than 
thirty years ago. It is here to-day in the fullness of a genera- 
tion of lusty growth, demanding not partial, but complete rec- 
ognition. 

Let us not mistake. This is no spasm of sentiment, no angry 
protest fired by agitation. It is the mature judgment of an 
enlightened public opinion, ripened by long experience and 
patient investigation. More than a score of years have passed 
since it became the settled conviction of the country — shippers, 
consumers, and producers alike — that the Federal Government 
had the absolute right and owed it as a duty to the public to 
regulate and control transportation charges on interstate com- 
merce. 

GRANGER STATE LEGISLATION. 

Wisconsin, Illinois, Iowa, and Minnesota had led the way. 
The legislation of that period, known in the decisions and in 
history as the " Granger legislation," has suffered unjust criti- 
cism from that day to this. It was denounced as radical and 
revolutionary ; as certain to demoralize business, drive out 
capital, stop all railroad construction, and arrest all develop- 
ment within the limits of these four States. Determined to 
prevent the spread of that legislation to other States, the press 
and periodicals were enlisted, economic writers employed, sta- 
tistical bureaus organized, and all the agencies which the car- 
riers of the country could command were set in motion to that 
end. 

The literature of that time teems with startling accounts of 
" Railroad construction at a standstill," the " Collapse of rail- 
road business," the " Spoliation and ruination of railroad prop- 
erty," the " Checking of all development in the Granger States." 
In that period the railroads were almost wholly in command of 
the statistics essential to an intelligent discussion of the ques- 
tion. They falsified the figures and imposed upon the public. 
It is not strange that economic writers of reputation, accepting 
the data of that heated time, should have been misled. 

It is due to the pioneers of that movement and pertinent to 
this discussion that the misstatements of fact which have stood 
for thirty years should be corrected. 

The Granger legislation was a rational and conservative pro- 
test, in statutory form, against an arbitrary, unjust, and op- 
6922 2 



18 

pressive control of transportation and transportation charges by 
common carriers. 

Mr. A. B. Stickney, president of the Chicago and Great West- 
ern Railroad, in his work on " The Railway Problem," written 
with an intimate knowledge of the conditions leading up to the 
Granger legislation, says of the methods employed by these cor- 
porations : 

The companies at first denied that they were common carriers or 
subject to the duties or restrictions imposed upon such carriers by the 
common law. * * * The managers claimed the right to charge 
such rates' * * * as they deemed for the best interests of their re- 
spective companies regardless of their reasonableness or equality. 
They claimed and exercised the right to grant monopolies in business 
to favored individuals and firms * * * by exercise of their powers 
to discriminate in regard to rates and combinations. * * * They 
assumed the right to dictate to communities in what market town they 
would sell their produce and buy their supplies. Thus a community 
located 40 miles distant from St. Paul and 400 miles distant from Chi- 
cago was compelled to trade in Chicago, so as to give the railway the 
long haul, and in order to enforce this dictation they did not hesitate 
to make the rate for 40 miles as much or more than for 400 miles. 
* * * They believed they had the right so to make their schedule 
of rates, as to determine which of the villages on their line should be- 
come centers of trade beyond their local territory. * * * They 
also varied their schedules in such a way that they discriminated in 
regard to rates between individual merchants, manufacturers, miners, 
and other business men, so as practically to determine which should 
become prosperous and wealthy, and which should not. 

As I shall have occasion to show later, the railroads of the 
country, excepting where partially restrained by law, have 
continued to the present time the identical wrongs and the 
same abuse of power which they practised upon the people in 
Wisconsin, Illinois, Iowa, and Minnesota, set forth in the quota- 
tion from President Stickney. 

The Granger statutes, so long and violently condemned, were 
imperfect with respect to some of the provisions for their 
enforcement, but they were correct in asserting the principle 
of government control, and were reasonable in their terms, 
in so far as the railroads were concerned. 

The Wisconsin law was enacted in 1874 and repealed in 1876, 
and Granger laws were enacted — Minnesota in 1871, Illinois in 
1873, and Iowa in 1874. By the beginning of 1875 it may be 
assumed that the effect of these Granger statutes would be 
fairly felt in all of the Granger States. Michigan, Indiana, 
Missouri, and Nebraska are four States more nearly similar in 
development, character of industry, and population than any 
other States with which comparison could be instituted. These 
four last-named States were not affected by the so-called 
Granger legislation. 

It is possible, therefore, by comparison, to ascertain the effect 
of the railroad legislation upon the four Granger States. I 
have also worked out a like comparison with the Middle At- 
lantic States, namely, New York, New Jersey, Pennsylvania, 
Delaware, Maryland, and West Virginia, in one group ; the 
Southern States — Kentucky, North Carolina, South Carolina, 
Georgia, Florida, Alabama, and Mississippi — in another group; 
and, finally, broadened the entire comparison to and including 
the railway mileage of all the States in the Union. I was thus 
able to test the results of the Granger legislation upon the 
railroads of the .Granger States, by comparing railroad devel- 
opment and railroad receipts between the Granger States and 
the four adjoining States, between the Granger States and the 
6922 



19 



Middle Atlantic States named, between the Granger States and 
the Southern States named, and likewise a comparison of the 
progress of railroad building and railroad receipts in the four 
Granger States as compared with the country at large. 

I submit a table showing the railway mileage for the years 
1871 to 1880 : 



States. 


1871. 


1873. 


1875. 


1880. 


Wisconsin, Illinois, Iowa, and Minnesota 

Michigan, Indiana, Missouri, and Nebraska.-. 


12,401 
9,168 
13,030 
13,013 
60,393 


14,637 
10,933 
13,643 

13,977 
70,378 


15,515 
11,381 
14,455 

13,287 
74,096 


19,428 
14,396 
15,949 
14,908 
93, 671 




United States 







Taking the railroad mileage for 1873, the year immediately 
preceding the legislation, and comparing it with the railroad 
mileage in 1875, by which time the effect of the Granger laws 
should have become clearly manifest, we find that railroad 
construction increased for the four Granger States 6.1 per cent ; 
the four adjoining States, 4.1 per cent ; the Atlantic States, 5.9 
per cent; the Southern States, 2.4 per cent, and the United 
States, as a whole, 5.5 per cent. 

It will therefore be seen that the Granger legislation did not 
stop railroad construction in the four Granger States. Indeed, 
they not only held their own, but increased their railroad mile- 
age over their immediate neighbors, and the other groups with 
which comparison is made, as well as the country at large. 
Let us test the matter further. 

The following table shows the gross earnings for the years 
1871 to 1880 : 



States. 


1871. 


1873. 


1875. 


1880. 


"Wisconsin, Illinois, and Iowa . . 
Michigan, Indiana, and Mis- 
souri 


$54,994,114 

44,433,246 
147, 130, 494 

41,772,103 
403,329,208 


$70,027,777 

59,106,865 
194,052,302 

53,696,409 
526,419,935 


$69,621,065 

54,731,069 
175,677,418 

50,399.227 
503,065,505 


$86,954,346 
79,038,920 


Middle Atlantic States 


199,003,718 


Southern States 


48,317,754 


United States 


615,401,931 







I found it impossible to include Minnesota and Nebraska in 
this comparison, for the reason that I could not procure com- 
plete data of the railway earnings of those States for the period 
named. For this reason, excepting those two States — Minne- 
sota from the group of Granger States and Nebraska from the 
group of adjoining States — carrying out the same comparisons 
with the several groups of States included in the calculations 
with respect to railway mileage, I found that the gross earnings 
decreased in the Granger States from 1873 to and including 
1875 one-half of 1 per cent ; in the adjoining States, 1\ per cent ; 
in the Middle States the gross earnings decreased %\ per cent ; 
in the Southern States, 6i per cent ; in the whole "country, 4.4 
per cent. It is shown, therefore, that during this period of 
general decline in the gross receipts of the railways the earnings 
in the Granger States were less affected than adjoining States 
or in the other groups and suffered vastly less than the country 
at large. 
6922 



20 

The comparison of net earnings is equally significant In the 
Granger Slates from 1873 to 1875 there was a substantial in- 
crease in the net earnings. In the adjoining States there was a 
decline in the net earnings amounting to 3 per cent. It there- 
fore appears that the railroads of the Granger States were able 
to withstand not only the " dire effects " of the Granger legisla- 
tion, but the depression which began with the panic in the 
money and stock markets in 1873 and spread to every operation 
in finance and commerce, continuing until the end of 1878. 

I have submitted in this connection but a small portion of 
the results of an investigation of this subject, every fact of 
which makes the demonstration stronger, that the Granger legis- 
lation neither retarded railway construction nor diminished 
railway receipts; that it did not demoralize business or stay 
Industrial development anywhere within its jurisdiction. The 
hue and cry raised by the railroads in advance, and continued 
after the statutes were enacted, accompanied with threats and 
warning, served in some measure the purpose of the railroad 
companies. 

Within two years they secured control of the Wisconsin legis- 
lature and repealed the Granger statute in that State. For 
twenty-eight years thereafter they were powerful enough in the 
legislature of Wisconsin to defeat the enactment of any law for 
the regulation of railway rates within that State. The Minne- 
sota statute was likewise repealed. Illinois maintained her 
hold upon the legislation secured, and succeeded in strengthen- 
ing «it in some measure. In Iowa the struggle was protracted 
until 1888, when she enacted a new and in many respects a 
most excellent statute, under which rates were established by 
a commission which, at the time, were fair to the railroads and 
just to the people. 

I shall have occasion later to refer to these States as bearing 
upon the proposition to invest a Federal commission with full 
power to ascertain and enforce reasonable rates. 

FEDERAL LEGISLATION. 

I come now to the consideration of Federal legislation. It 
was inevitable that the conditions which invoked State au- 
thority in regulation of State commerce should seek to secure 
the exercise of Government authority in the regulation of inter- 
state commerce; and it was to be expected that the section of 
the country which had first proclaimed the right to control com- 
mon carriers through State legislation should furnish the men 
to first assert that right in Federal legislation. 

March 26, 1874, the House of Representatives passed a bill 
introduced by Mr. McCrary, of Iowa, which marks the begin- 
ning of positive legislative action upon the broad question of 
railway rate regulation. 

It has been asserted in this debate that the first bill ever 
introduced in Congress upon that subject was introduced by 
Mr. Charles Sumner. As no copy of that bill can be found In 
the files of Congress, and as the title is somewhat misleading, 
it is quite natural that that statement should have been made. 
An investigation of contemporary publications, however, dis- 
closes the fact that the Sumner bill had reference solely to the 
transportation of troops and did not deal at all with the ques- 
tion under consideration by Congress at the present time. 



21 

The McCrary bill, considering the early date of its adoption 
in the House — thirteen years before the final passage of the 
interstate-commerce act — was a very comprehensive measure 
and merits some attention in this connection. Referring only 
to the main provisions respecting the regulation of rates: It 
provided that no interstate carrier should receive more than 
a fair and reasonable rate of compensation for any transpor- 
tation service. It proposed to create a board of railroad 
commissioners of nine members. The commissioners were em- 
powered to investigate thoroughly freight and passenger 
charges, and the reasonableness thereof, and prepare schedules 
of reasonable maximum rates, and to change and revise the 
same " so often as circumstances may require." Penalties were 
provided for charging more than reasonable rates, and it was 
made the duty of the Commission to bring suit, upon ascertain- 
ing facts warranting such action, for the enforcement of said 
penalties. If upon trial of said suit it should appear that the 
defendant had charged more than provided for in such schedules, 
it was provided that — 

In that case such defendant shall he deemed and held guilty of ex- 
tortion and liable therefor, unless such defendant shall show affirma- 
tively that the rate charged * * * wa s nevertheless fair and 
reasonable. 

The bill was so amended pending its consideration by the 
House as to make its penalties apply to discriminations as 
well as to unreasonable and extortionate rates. The McCrary 
bill did not pass the Senate. 

From the passage of the McCrary bill by the House, March 
25, 1874, neither branch of Congress passed any measure until 
1878, when the House passed the Reagan bill. In the meantime 
the system of discriminations between persons, localities, and 
commodities, which were of secondary consideration when the 
McCrary bill was passed, had grown so aggravated in charac- 
ter as to become of primary interest by 1878. This is reflected 
in the new bills introduced from 1874 to 1878. It doubtless ac- 
counts mainly for the fact that the Reagan bill of this date was 
designed to prevent discriminations. The Reagan bill passed 
the House, but it did not pass the Senate. 

Two years before the Reagan bill of 1878 passed the House, 
the Supreme Court had decided the Granger cases and the 
Munn case, and had settled great principles lying at the foun- 
dation of this important subject. Its decisions pointed the way 
for Congress. Yet no legislation was enacted until 1887, when 
the interstate-commerce law was finally passed. 

The act of 1887 declared unreasonable rates unlawful, and 
imposed penalties for discriminations as to persons, places, and 
commodities. The report made by the Committee on Interstate 
Commerce presenting the bill to the Senate states the evils 
which the bill was intended to remedy, and among them enu- 
merated the following: 

That local rates are unreasonably high as compared with through 
rates. 

That both local rates and through rates are unreasonably high at 
noncompeting points, either from the absence of competition or in 
consequence of pooling agreements that restrict its operation. 

That rates are established without apparent regard to the services 
performed, and are based largely on what the traffic will bear. 

That the stock and bonded indebtedness of the roads largely exceed 
the actual cost of their construction or their present value, and that 
unreasonable rates are charged in the effort to pay dividends on wa- 
tered stock and interest on bonds improperly issued. 
6922 



22 

The report from which the foregoing is extracted is volumi- 
nous and is one of the important contributions to the literature 
of this subject. 

RAILROADS AND TRUSTS. 

Mr. President. I have sketched briefly the main facts in the 
development and history of legislation in relation to the trans- 
portation problem down to the date of the enactment of the 
interstate-commerce law in 1887. During this period — from 
1870 to 1887 — many events of great moment transpired with 
respect to the commerce and the industries of the country. 
The failure of Congress to give heed to the manifest relation 
of trust organization to transportation throughout the early 
period ; the failure of Congress to broaden and strengthen the 
law of 1887 when its weakness became apparent, making it rep- 
resent the full constitutional power of the Federal Government ; 
the failure of Congress to repair even its fatal defects when 
plainly pointed out by the Supreme Court and the Commission, 
makes the mortifying recital of the next period in this history. 

Contemporaneous with the history of thirty years' struggle 
for rate regulation is the history of the insidious growth of 
trusts and a single legislative attempt to cope with the resulting 
evils independent of railroad legislation. 

There was a trust investigation in 1875-76 that revealed a 
suggestion of the truth with respect to the criminal compact 
between Standard Oil and the railroads. It was shown that 
John D. Rockefeller and his associates, aided by alliance with 
the transportation lines running through the oil regions, were 
crushing opposition and laying the foundation for the most 
powerful monopoly in the world. 

The Testimony of the Congressional committee of 1876, the 
Hepburn committee of 1879, the Senate committee of 1885. the 
House committees of 18S8 and 1893. all demonstrated the evil 
nature of the alliance of the railroads with Standard Oil. with 
the beef, and with the coal combine. From 80 to 100 bills 
were introduced in Congress, but they did not get beyond the 
committees to which they were referred. Driven to cover and 
the exercise of greater caution by the partial exposure of their 
criminal methods, reorganizations were effected by the growing 
monopolies, names were changed, and public indignation was 
quieted. 

But by 1890 it had become apparent that powerful influences 
were at work in the business world destroying equality of op- 
portunity. Markets and prices were disturbed and established 
business enterprises forced out of the field. The public began 
to understand that combinations were forming, that trust 
organizations were being effected in many lines of production, 
and that these organizations were suppressing competition. 

The current literature of that time makes interesting read- 
ing to-day. It was charged on the one hand that the trust was 
the offspring of the tariff. It was declared upon the other that 
the trust was a progressive business evolution, a legitimate 
effort to cheapen production. Two great national campaigns 
were waged mainly upon the isfsue that the tariff was the 
mother of trust and combination. 

In the meantime a national statute had been enacted which 
was aimed at the trust and combination as an independent 
conspiracy. The lesson of the Standard Oil, the beef, and coal 

692U 



23 

alliance with transportation seemed well-nigh forgotten. The 
Sherman Act was the work of a statesman and would have 
aided greatly if its violations had been vigorously prosecuted. 
But it was made apparent very early that the root of the evil 
can not be reached by striking at the trusts alone. It is the 
railroads in combination with the trusts that constitutes the 
great problem. 

FAILURE OF INTERSTATE-COMMERCE LAW. 

In May, 1897, the Supreme Court in the Maximum Rate case 
decided that it was not the intent of the interstate-commerce 
law to invest the Commission with authority to enforce its 
determination with respect to rates. This reduced the Com- 
mission merely to a body authorized to hear complaints, take 
testimony, and make recommendations. The legislative intent 
as determined by the court is not questioned. The fact re- 
mains, however, that many who participated in the legislation — 
the Commission, the railroads, and the public — understood that 
authority to supervise rates and to issue orders and decrees 
with respect to what a rate should be, was , conferred upon the 
Commission at the time the law was enacted. 

This statement is of value at this time only as bearing upon 
the scope of the authority to be conferred upon the Commission 
by this Congress, the intent of which, it is hoped, will be made 
so clear as to leave nothing to require construction. 

The first Interstate Commerce Commission, Judge Thomas M. 
Cooley, chairman, construed the law as giving to it supervision 
over rates and authority to issue orders as to what a rate 
should be. The first case decided after the Commission organ- 
ized, the Walla Walla Grain case, in the decision of which Judge 
Cooley participated, placed this construction upon the law. 
During the entire time that he continued as a member of the 
Commission and long thereafter the Commission construed the 
law in like manner as to all cases raising that issue. 

The Commission in its annual report for 1897 thus states the 
fact with respect to the exercise of this supposed power: 

The Commission exercised this power in a case commenced in the 
second month after its organization and continued to exercise it for a 
period of more than ten years, during which time no member of the 
Commission ever officially questioned the existence of such authority or 
failed to join in its exercise. 

It was so accepted by the railroads, and for years the ques- 
tion was not even raised. That the interstate-commerce act 
for a time exerted a wholesome influence upon carriers and 
shippers and, in a measure, checked the upbuilding of monopoly 
through discriminations the public was certainly led to believe. 
There was a show of compliance with the law following its 
enactment. But it soon became apparent that the practices 
prohibited by the law were being resumed. Passes were issued 
to favored individuals, rebates . were again granted, substitu- 
tions for rebates were resorted to, and discriminations practiced 
in various ways. 

RECOMMENDATIONS OF 1897. 

In its report for 1897, after reviewing the result of this deci- 
sion and those which had preceded it, each one further reducing 
its efficiency, the Commission presented the unfortunate situa- 
tion as follows : 

There is to-day, and there can be under the law as now interpreted, 
no effective regulation of interstate carriers. If there is to be under 
this act it must be amended. From the best considerations we have 
6922 



24 

been able to give the subject, we believe that the most essential features 
of such an act must be those previously enacted. A tribunal which 
regulates the common carriers by railroad of interstate traffic, which 
can stand for justice and fairness between these carriers and the 
people, must have the power to fix a maximum rate, to fix in certain 
instances a minimum rate, and its orders when made must mean some- 
thing. 

After carefully reviewing the decision of the court which 
denied to the Commission the right to continue in the exercise 
of the powers of regulation theretofore exercised, the Commis- 
sion made careful and specific recommendations in its report 
for 1897 for the amendment of the act. It was recommended 
that the act be so amended as to empower the Commission to 
call in question any rate or charge, and issue an order upon the 
carrier, either upon its own motion or upon a complaint being 
made to the Commission to appear and " to show cause why 
said rate shall not be held to be unreasonable or otherwise in 
violation of law," and on such order and notification to the car- 
rier to have a " full hearing." The amendment as proposed 
goes on to provide what I shall read. 

I beg the attention of Senators here to what I shall now 
quote. It is the specific recommendation of this Commission 
as to what it is necessary for Congress to do if we are so to 
amend the law of 1887 as to regulate railway rates and prac- 
tices. I read from the report of the Commission for 1S97 : 

If the Commission is of the opinion that the rates, fares, or charges 
as filed and published, or the classification, facilities, and regulations 
published in connection therewith are unreasonable or otherwise in 
violation of law, it shall determine what are and shall be reasonable 
and otherwise lawful rates and fares, charges, classifications * * * 
and shall prescribe the same and shall order the carriers to file and 
publish schedules in accordance with such decision. 

And such orders were to be enforcible under the penalties 
provided in section 16 of the act. And it was further proposed 
to be provided that on full hearing the Commission could make 
any further reduction in such rates. 

It was further proposed to amend the act in section 15, to 
provide that if, after a full hearing — 

It is determined that any carrier is in violation of the provisions of 
this act, the Commission shall make an order directing such carrier to 
cease and desist from such further violation, and shall prescribe in such 
order the thing which the carrier is required to do or not to do for the 
future to bring itself into conformity with the provisions of this act ; 
and in so doing it shall have power — 

(a) To fix a maximum rate covering the entire cost of the service ; 

(b) To fix both a maximum and a minimum rate when that may be 
necessary to prevent discrimination under the third section ; * * * 

(d) To make changes in classification ; 

(e) To so amend the rules and regulations under which the traffic 
moves as to bring them into conformity with the provisions of this act. 

These are the recommendations of the Commission in 1897, 
ten years after it was established. With a decade of experience 
the Commission well understood what powers were vitally 
essential to an effective administration of the law. The au- 
thority to do these specific things they declared to be neces- 
sary if there was to be a regulation of railway rates and rail- 
way services. * 

This was, indeed, an urgent appeal. It seems well-nigh in- 
credible that it should have failed to meet approval in either 
branch of the National Legislature. 

COMMISSION'S RECOMMENDATIONS AUTHORITATIVE. 

Mr. President, the Interstate Commerce Commission has, I be- 
lieve, ever since that body was first organized, been composed 

6922 



25 

of men distinguished for their ability, learning, and special fit- 
ness. Without exception they have been men of the highest 
character. I believe that they have been fearless and impartial 
in the discharge of official obligation. They are the appointees 
of Democratic and Republican Administrations. The Senate has 
consented to and approved their selection. The task of the 
Commission has been from the beginning a most arduous one. 
Dealing with great and complex interests, it constitutes a 
branch of the official service which enjoys the esteem and con- 
fidence of the American public. Bringing to the charge of 
official duty a varied training and experience, concentrating 
every faculty of thoroughly disciplined minds upon the questions 
involved in the regulation of interstate commerce of this great 
nation, it could not fail to become easily the highest authority 
in the special field of its employment. 

Mr. President, the gifted and distinguished Senator from 
Texas, in support of his amendment to take from inferior 
courts the right to suspend by preliminary injunction the rates 
fixed by the Commission, urged that the expert knowledge of 
the Commissioners, acquired by constant application to all of 
the problems of transportation, made their judgment with re- 
spect to the reasonableness of the rates superior to that of the 
court. I think all who heard him were compelled to agree with 
that contention. 

That which is true of the Commission's ability to judge 
wisely with respect to rates in the trial of a particular case is 
equally true with respect to all of the duties which they are 
constantly called upon to discharge. But, Mr. President, above 
all things is it true that the Commissioners are best able to 
judge wisely with respect to the law itself which they are called 
upon to administer. They go patiently through with every case, 
from the filing of the complaint* to the final judgment rendered 
upon the record, and must consider well the law with respect to 
its every phase. They must study every section and sentence of 
the statute day after day and year after year ; they hear it dis- 
cussed and dissected and expounded by the able lawyers for the 
complainant and by the learned counsel of the greatest railroad 
corporations in the world. 

Of all men they ought to be the ones best able to submit rec- 
ommendations to Congress with respect to changes in the law; 
if it is defective, to point out the defects ; if its faults can be 
remedied, to suggest the remedy. Their recommendations are 
without prejudice or bias. We can take them as we would the 
unanimous opinion of the judges of the Supreme Bench with re- 
gard to the faults and weaknesses and injustice of any law 
which the court is called upon to construe. Indeed the Commis- 
sion has this advantage : Any court must hear many cases and 
pass upon different statutes; the Commission deals every day 
with the same law and with its relation to the same subject. 

For these reasons the statesmen who -framed the interstate- 
commerce law in 1887 provided : 

That the Commission shall, on or before the 1st day of December 
in each year, make a report, which shall be transmitted to Congress, 
copies of which shall be distributed as are other reports transmitted 
to Congress. This report shall contain such information and data 
collected by the Commission as may be considered of value to the 
determination of questions connected with the regulation of Com- 
merce — 

6922 



26 



Now. mark what follows !- 



together xcith such recommendations as to additional legislation relat- 
ing thereto as the Commission may deem necessary. 

Congress therefore laid its commands upon the Commission to 
recommend legislation, the need for which should become appar- 
ent to them in administering the duties of their office. 

RECOMMENDATIONS IGNORED. 

Mr. President, I now call the attention of the Senate to the 
fact that these important recommendations have been urged 
again and again, and that they have been ignored by Congress 
year after year. 

Congress having failed to act upon the recommendation of 
the Commission in 1897, to correct the defects of the law as 
shown by the Maximum Rate Case, the Commission again 
urged action upon those same recommendations in the report 
for 1898, saying: 

There is now no power, in the judgment of the Commission or In 
the judgment of the court, to restrain a railroad company from demand- 
ing and receiving unreasonable and unjust charges. 

They said further : 

The power of establishing or fixing reasonable rates in advance is 
the only practical legal remedy for extortion and unreasonable and 
unjust charges. 

In this report reference is made to the report of the previous 
year in the following language : 

We have not only set forth in general terms the necessity for 
amending the law, but have formulated and proposed the specific 
amendments which appear to us positively essential. With the renewal 
of these recommendations, no duty of the Commission in this regard 
remains undischarged. 

Congress having failed to act upon this recommendation, the 
Commission, in its report for 1899, said : 

Every consideration of private justice and public welfare demands 
that railway rates shall be reasonable, uniform to all shippers, and 
equitable between all communities. Until needful legislation is sup- 
plied that demand must remain unsatisfied. 

Reference is made in this report to the recommendations 
previously made, the many indorsements of them received from 
agricultural, manufacturing, and commercial interests through- 
out the country, to which the Commission adds : 

It is sufficient to say that the existing situation and developments 
of the past year render more imperative than ever before the necessity 
for speedy and suitable legislation. We therefore renew the recom- 
mendations heretofore made and earnestly urge their early considera- 
tion and adoption. 

Congress having failed to act upon this recommendation, the 
Commission in its report for 1900 said : 

The requests of the Commission for needful amendments have been 
supported by petitions and memorials from agricultural, manufactur- 
ing, and commercial interests throughout the country, yet not a line of 
the statute has been changed, and none of the burdensome conditions 
which called for relief have been removed or modified. 

They say further in this report : 

With reference to further legislation, the Commission has little to 
suggest, and nothing new to propose. * * * Recommendations, 
both general and specific, have been repeatedly made. The views 
6922 



27 

heretofore officially expressed are believed to be justified alike by ex- 
perience and reflection. They are confirmed by later and current ob- 
servation. 

Congress having failed to act upon this recommendation, in 
1901 the Commission, in its report, urges again the amend- 
ments previously recommended, and adds : 

The reasons for urging these amendments have been carefully ex- 
plained, and repetition of the arguments at this time can hardly be ex- 
pected. * * * Knowledge of the present conditions and tendencies 
increases rather than lessens the necessity of legislative action upon 
the lines already indicated, and in such other directions as will fur- 
nish an adequate and reasonable statute for the regulation of com- 
merce among the several States. 

Congress having failed to act upon this recommendation in 
1902, after discussing the defects in the law, the Commission in 
its report for that year said: 

The fullest power of correction is placed in the Congress and the 
exercise of that power is demanded by the highest consideration of 
public welfare.. * * * If the representations already made do not 
Induce favorable action, it is certainly not the fault of the Commission. 
* * * A sense of the wrongs and injustice which can not be pre- 
vented in the present state of the law, as well as the duty enjoined 
by the act itself, impels the Commission to reaffirm its recommenda- 
tions, for the reasons so often and so fully set forth in previous re- 
ports, and before the Congressional committees. 

Mr. President, it is worth while to pause here and note the 
warning that appeared in this recommendation of the Inter- 
state Commerce Commission to the Congress and to the coun- 
try, that the railroads were combining and the situation was 
growing more and more serious. 

Moreover, in view of the rapid disappearance of railway competition, 
and the maintenance of rates established by combination, attended as 
they are by substantial advance in the charges on many articles of 
household necessity, the Commission regards this matter as increasingly 
grave, and desires to emphasize its conviction that the safeguards re- 
quired for the protection of the public will not be provided until the 
regulating statute is thoroughly revised. 

Still Congress failed to act upon these recommendations. It 
passed the Elkins law to provide against departures from the 
published rate. But it did nothing to give the Commission 
power to protect the commerce of the country against repidly 
advancing rates. 

At the beginning of the next session, in December, 1903, 
after referring to the Elkins law (passed February 19 preced- 
ing) at some length in its report, the Commission says: 

It (the Elkins law) has added nothing whatever to the power of 
the Commission to correct a tariff rate which is unreasonably high or 
which operates with discriminating effect. It greatly aids the ob- 
servance of tariff charges, but it affords no remedy for those who 
are injured by such charges, either when they are excessive or when 
they are inequitably adjusted. If the tariffs, published and filed as 
the law directs, are enforced against the shippers alike, the authority 
of the Commission to require such tariffs to be changed remains just 
as ineffectual as it was before this legislation was enacted. This is 
the point to which the attention of Congress has been repeatedly 
called. This is the defect in the regulating statute which demands 
correction. In previous reports this question has been frequently and 
fully discussed. We have commented at length upon the weakness 
and inadequacy of the law as its provisions have been construed by 
the courts. We have carefully pointed out the amendments which 
we deem essential, and explained in detail the reasons for our recom- 
mendations. We are unable to add anything of value to the presen- 
tation heretofore made. Our duty in this regard has been performed. 
6922 



28 

Attention is again called to the recommendations previously 
made, and these are reaffirmed. The need of this legislation 
is said to be all the more imperative as an indirect result of 
the Elkins law. The Commission says: 

The effect of that legislation in many cases was to bring about an 
iHcrease of railroad charges. 

Again in 1904 the Commission reiterated its recommenda- 
tions and renewed its warning ; the previous discussions of 
the " weakness and inadequacy " of the interstate-commerce 
law are again recalled, and former " urgent recommendations " 
are once more cited to the attention of Congress. The enormous 
advances in freight rates as set forth in the reports for 1902 
and 1903 are again cited as additional considerations calling 
for the enactment of these oft-repeated recommendations. 

Congress having failed to act upon these recommendations, 
at the beginning of the present session in 1905, the Commission 
said, with respect to the granting of power to fix future rates : 

We deem it unnecessary to discuss this question in the present re- 
port further than to reaffirm the facts heretofore expressed. 

Mr. President, I have quoted from nine annual reports made 
by this Commission, each clear and explicit in its terms; each 
portraying the fatal weaknesses of the law ; each strongly ap- 
pealing for amendment to cure the defects. These nine reports 
have been issued since the decision of the Supreme Court ren- 
dered the Commission absolutely powerless to restrain a rail- 
way company from demanding and receiving unreasonable and 
unjust charges. These reports came from a body of men, each 
of whom the Senate had joined in selecting to administer the 
law and to recommend needed amendments from time to time. 
Until a few days ago I never understood why Congress had 
failed to act upon the important recommendations and the 
urgent appeals made year after year by the Commission for 
the repair of this broken-down statute. But it has been made 
plain at last. It was disclosed during the debate upon the 22d 
of March, when the Senator from Nevada [Mr. Newlands] pro- 
pounded the following question to the Senator from Massachu- 
setts [Mr. Lodge] : 

Mr. Newlands. I wish to ask the Senator [Mr. Lodge] whether he 
bears in mind the fact that the original interstate-commerce act calls 
upon the Interstate Commerce Commission to make recommendations 
to Congress from time to time in regard to legislation? 

Mr. Lodge. I had forgotten that they were called upon to make rec- 
ommendations to Congress. 

Here we have at last a possible explanation for the failure 
of Congress through all these years to legislate some vitality 
into the interstate-commerce act. Congress, like the Senator 
from Massachusetts, must have forgotten that the law required 
the Commission to make recommendations. It must have for- 
gotten the existence of the Commission. Is it strange that with 
nine years of failure on the part of Congress to respond to 
these recommendations the Commission should, through maga- 
zines, the press, and the platform, address itself from time to 
time to the public in an effort to awaken Congress from its deep 
sleep? 

But, sir, even if Senators, and indeed the entire Congress 
had forgotten that the Commission was required to make recom- 
mendations, even though it had forgotten its recommendations, 
and the very existence of the Commission, there were other rea- 
sons why it should have taken action upon this subject. 

6922 



29 

Soon after the decision of 1897, petitions, memorials, and reso- 
lutions, urging Congress to amend the interstate-commerce law 
and clothe the Commission with power to regulate rates, came 
pouring in upon the Congress from agricultural, manufacturing, 
and commercial interests throughout the country. State legisla- 
tures from every section of the country solemnly memoralized 
Congress upon the subject. 

THE PRESIDENT URGES CONGRESS TO ACT. 

The President of the United States had not forgotten that it 
was the duty of the Interstate Commerce Commission to recom- 
mend legislation. He had not forgotten the purpose of the act 
of 1887, and in his message to the Congress in December, 1901 — 
away back four years ago — he said : 

The cardinal provisions of that act were that railway rates should 
he just and reasonable and that all shippers, localities, and commodi- 
ties should he accorded equal treatment. 

He had evidently read and reflected upon the important 
recommendations made year after year by the Commission, for 
in this same message he said: 

This act should be amended. The railway is a public servant. Its 
rates should be just to and open to all shippers alike. The Govern- 
ment should see to it. that within its jurisdiction, this is so, and 
should provide a speedy, inexpensive, and effective remedy to that end. 

He waited three years for the Congress to act, and then in 
his message in December, 1904, after a general discussion of the 
subject, he said : 

In my judgment the most important legislative act now needed, as 
regards the regulation of corporations, is this act to confer upon the 
Interstate Commerce Commission the power to revise rates and regula- 
tions, the revised rate to at once go into effect and stay in effect unless 
and until the court of review reverses it. 

Another year passed by. No law was enacted enlarging the 
authority of the Commission and conferring upon it power to 
revise rates and regulations. At the beginning of the present 
session, December, 1905, the President again reminded Con- 
gress of its duty to the public. He presented the relation of the 
railway problem to the control of transportation, and reiterated 
the urgency for prompt action in the following words : 

As I said in my message of December 6 las,t, the immediate and most 
pressing need, so far as legislation is concerned, is the enactment into 
law of some scheme to secure to the agents of the Government such 
supervision of the rates charged by the railroads of the country, en- 
gaged in interstate traffic, and shall summarily and effectively prevent 
the imposition of unjust and unreasonable rates. It must include put- 
ting a complete stop to rebates in every shape and form. 

Mr. President. I believe that the recommendations of the 
Interstate Commerce Commission should have the greatest 
weight with Congress, and should be followed in framing a law, 
unless there are controlling reasons for their rejection. 

I believe that the failure to enact into law the recommenda- 
tions of the Commission made and repeated year after year for 
a long decade has cost the American people hundreds of mil- 
lions of dollars in excessive transportation charges, and hun- 
dreds of millions of dollars in the increased cost of trust-made 
articles, the monopoly element of which the railroads have con- 
ferred upon the trusts. This increased burden has fallen with 
the greatest weight upon the humbler homes, where the in- 
creased expense of living has made havoc with the savings of 
the family. 
6922 



30 



I believe that the recommendations of the Commission en- 
acted into law, together with legislation logically corollary, fol- 
lowed by an appropriation of the money necessary to vigorous 
enforcement, would have preserved industrial independence for 
this generation of men. 

INDUSTRIAL CONSOLIDATION. 

What are the industrial conditions with which the nation is 
confronted to-day? What are the results of the failure of Con- 
gress to act in accordance with its power and its obligation? 
Great evils grow out of small beginnings. The railroads began 
by despising their common-law obligations to treat all shippers 
alike. They despised small traffic transactions. They were 
bound to have tonnage, more tonnage, bigger tonnage. They 
openly bought tonnage with rebates. They preferred to trans- 
act business with a few large shippers. They drove out the 
small dealers with advancing rates, forced them into retirement 
and turned their business over to the trusts. 

To this end they were ready to defy State and Federal au- 
thority. They recognized one law, a law of their own making — 
the law of combination. Denied the right to pool by the inter- 
state-commerce act they made traffic agreements to nullify the 
statute. Denied the right to make traffic agreements by the 
courts they nullified the decisions by combinations. They ab- 
sorbed the small companies. They gathered their roads into 
trunk lines, the trunk lines into systems, the systems into great 
groups. 

In order to convey some idea of the enormous combinations 
which have been formed in the railway world and of the unlim- 
ited power thereby centered in the hands of a few individuals, 
the following statement is submitted. The figures in this case 
are mostly taken from Moody's Manual of Railroads, a recog- 
nized authority : 

The six great groups. 



Classification. 



Vander bilt group 

Pennsy lvania group 

Morgan-Hill group 

Gould-Rockefeller group 

Moore-Leeds group... 

Harriman-Kuehn-Loeb group 

Total 

Allied systems , 

Total under control 



Number 
of roads 

em- 
braced. 



132 
280 
225 
100 
91 
85 



Mileage 
of each 
group. 



21,888 
19. 3fi0 
47.206 
28. 157 
25,092 
22,943 



164,586 
250 13,721 



1,172 178,307 



Capitaliza- 
tion of each 
group. 



$1,169,132,133 
1,822.402.235 
2,265,116,359 
1,368,877,540 
1,059,250,939 
1,321,243,711 



9,006,086,916 
380,277,000 



,386,363,916 



We have here nearly 90 per cent of the vital railway mileage 
of the country controlled by six sets of financiers, with an 
identity of interest which at will signifies practically a single 
control. No one can be so blind as not to see the purpose and 
the certain result of this consolidation. The country has been 
partitioned and apportioned among these great groups. Each 
group dominates in its own territory. With agreements as to 
classifications, rates, and divisions of traffic, the railway busi- 
ness ceased to be a competitive business. It has become a mon- 
6922 



31 

opoly in fact, controlling the course and destination of trans- 
portation and its tolls and charges on all interstate commerce 
and on all State commerce excepting where interfered with by 
State control. 

The transportation companies built up the great industrial 
trusts through transportation agreements. Their identification 
now became more pronounced. They became partners in in- 
terest. The railroads acquired ownership in the trusts. The 
trusts acquired ownership in the railroads. Coal, oil, iron, 
steel, shipping, telegraph, express, gas, beef, food products, 
and, indeed, the whole field of industrial production came 
rapidly into combination and unity of interest. They did not 
stop here. Banking, insurance, in fact the whole commercial 
system, was centralized. Less than one hundred men officered, 
controlled, and directed throughout the entire field. The iden- 
tity of ownership could be seen in the appearance and reap- 
apearance of the same names, some in one group, some in 
another, massing and knitting together its vast organization. 
This was the inevitable result of turning over the highways to 
the common carriers unrestrained. Combination was bound to 
breed its own kind. 

Are special instances required to sustain this conclusion? Is 
it necessary to review the history of the Standard Oil, coal, 
iron, beef, the grain, and elevator combines, each represented 
in railroad ownership? The records of courts, Congressional, 
and legislative investigation furnish abundant and enduring 
testimony of their crimes against the American people. They 
stand out against the dark background of thirty years of rail- 
road history a menace and a reproach to government. They 
are but types of a whole army of railroad-made and railroad- 
fostered trusts. 

Because of recent disclosures the sugar trust is of interest 
at this time, and furnishes a conspicuous example, illustrating 
the relation of the trust to railroad transportation. 

Mr. John Moody, of New York City, recognized as an au- 
thority by those trading in trust and railroad stocks and secu- 
rities, two years ago classified the trusts of the country as 
follows: The greater industrial trusts, the lesser industrial 
trusts, the franchise trusts, and the great railway groups. 

The greater and lesser industrial trusts, comprising the most 
important industrial trusts in the United States, two years 
ago numbered 318 separate trust organizations, representing the 
consolidation of 5,288 plants or manufacturing establishments, 
with a total stock and bond issue of $7,246,342,533. These con- 
solidations dominate practically every field of industrial enter- 
prise in the United States, from the manufacture of railroad 
locomotives and pressed-steel cars to matches and chewing 
gum. Of the greater industrial trusts, all have been organized 
or reorganized since April 1, 1890. With the exception of the 
sutfar trust, all were incorporated in the State of New Jersey. 

The sugar trust was incorporated in its present form in 1901. 
It has acquired ownership or control of 55 corporations, 
representing 70 to 90 per cent of the entire sugar-refining in- 
dustry of this country. The element of monopoly in this or- 
ganization is very powerful, consisting of tariff benefits and 
practical control of the sources of raw material. It is capital- 
ized at $145,000,000. Although this is vastly more than the 
6922 



32 

investment represented, its virtual control of the market enables 
the trust to earn dividends averaging about 12 per cent on its 
capitalization. For fifteen years since it was organized the 
sugar trust has paid dividends ranging from 7 to 12^ per cent. 
The dividends actually earned during these years have been 
much higher than this, but the management have latterly 
adopted the policy of paying directly as dividends a modest 7 
per cent. This course was prompted by the fear that the 
public patience would not endure the high prices on sugar nec- 
essary to pay the extravagant dividends which are actually 
being exacted from consumers upon the millions of dollars of 
watered stock in the trust. 

Protected by the tariff from competition with foreign re- 
fineries the sugar trust is placed in a position of immense 
commercial advantage. With the aid of the transportation 
lines it is invested with an absolute monopoly, enabling it to 
control the prices upon this article of daily use in every home 
and tax every table at will. 

On the 7th of February, 1906, Congressman William R. 
Heaest submitted to the Department of Justice of the Federal 
Government sworn complaints charging a compact between the 
sugar trust and officers of the Pennsylvania, New York Cen- 
tral, the Delaware, Lacawanna and Western, the Philadelphia 
and Reading, the New York, New Haven and Hartford and 
several other railroad companies. Mr. Heaest has placed 
in the hands of the Attorney-General such an array of facts in 
support of his complaints that the Government has asked for 
the indictment of the head of the sugar trust and some of the 
most prominent railroad officials controlling nearly all of the 
trunk lines east of the Mississippi River. 

In the case of the United States v. Armour & Co. et al., 
lately tried before Judge Humphrey at Chicago, Attorney-Gen- 
eral Moody, in the course of his argument, said : 

Not long ago the enterprise of the proprietor of one of the New York 
papers discovered much information which tended to show that all the 
great trunk lines running out of New York City had been practicing 
discrimination in the form of rebates to the American Sugar Refining 
Company. With what I believe was rare self-denial and a high sense 
of public duty that evidence was offered to the Department of Justice. 
Out of it charges have grown against the railroads and against the 
sugar company, and they are now under consideration by the grand 
jury. I express no opinion whether the charges are true or false, 
there are ways of deciding that question when the time shall come. 
These rebates, amounting in the aggregate to hundreds of thousands of 
dollars, have been often given to the sugar company to aid it in its 
fight with the farmers who are conducting the struggling industry of 
producing sugar from beets. When the sugar company wanted to 
overcome the competition of the farmer, wanted to lay such stress upon 
him that he would give up the contest in despair and dispose of his 
property to the monopoly, it went to the railroads and borrowed a 
club by which it clubbed the farmer to death. 

Let it not be supposed for one moment that the payment of 
rebates imposes any burden upon the railroad company. What- 
ever sums of money are necessary to enable the sugar trust to 
maintain its advantage over competitors and to aid in paying 
extravagant dividends costs the railroad company nothing. It 
is all taken out of the consumers and enough more with it to 
swell railroad surplus and pay profits on its inflated capitaliza- 
tion as well. For proof of this turn to the rate schedules of 
the railroad companies, and it will be found that they have in- 
6922 



33 

•creased transportation charges upon this article of prime neces- 
sity more than five and one-half million dollars since 1897. 

Again and again the Interstate Commerce Commission, in 
their reports to Congress, called attention in unmistakable lan- 
guage to existing conditions and their helplessness under the 
law as construed by the court. 

I quote the following from the report of the Commission of 
1899 : 

It is a matter of common knowledge that vast schemes of railway 
control are now in process of consummation and that competition of 
rival lines is to be restrained by these combinations. * * * If the 
plans already foreshadowed are brought to effective results and others 
of similar scope are carried to execution, there will be a vast centrali- 
zation of railroad properties, with all the power involved in such far- 
reaching combinations yet uncontrolled by any public authority which 
can be efficiently exerted. The restraints of competition upon exces- 
sive and unjust rates in this way are avoided, and whatever evils may 
result will be remediless under existing laws. 

In its report for 1900 the Commission says : 

One of the striking features of recent times in the industrial world 
has been the tendency to combine for the purpose of limiting or elimi- 
nating competition. In no branch of industry probably is the induce- 
ment to promote combinations of this sort greater nor the advantage 
to be hoped for from them more certain than in railway operations. 
* * * We should, however, hardly discharge our duty in a report 
to Congress upon the railway operations of this country if we did not 
call attention to these combinations and the effect which they are 
likely to produce. 

In January, 1901, the Commission said in its report to Con- 
gress : 

More instructive than any argument are the results of an investi- 
gation just made at Chicago into the movement of packing-house prod- 
ucts, a more detailed account of which hereafter appears. The facts 
developed upon that investigation, and upon a previous investigation 
into the movement of grain and grain products, which is also referred 
to later, are of such a character that no thoughtful person can con- 
template them with indifference. That the leading traffic officials of 
many of the principal railway lines, men occupying high positions and 
charged with the most important duties, should deliberately violate 
the statute law of the land, and in some cases agree with each other to 
do so ; that it should be thought by them necessary to destroy vouch- 
ers and to so manipulate bookkeeping as to obliterate evidence of the 
transactions ; that hundreds of thousands of dollars should be paid 
in unlawful rebates to a few great packing nouses ; that the business 
of railroad transportation, the most important but one in the coun- 
try to-day, paying the highest salaries and holding out to young men 
the greatest inducements, should to such an extent be conducted in 
open disregard of law, must be surprising and offensive to all right- 
minded persons. Equally startling at least is the fact that the own- 
ers of these packing houses, men whose names are known throughout 
the commercial world, should seemingly be eager to augment their 
gains with the enormous amounts of these rebates which they receive 
in plain defiance of a Federal statute. These facts carry their own 
comment, and nothing said by us can add to their significance. 
******* 

The effect is to give these large packers an- enormous advantage 
over their small competitors. * * * Already these competitors 
have, in the main, ceased to exist. 

We find in these disclosures a pregnant illustration of the manner 
in which secret concessions are tending to build up great trusts and 
monopolies at the expense of the small, independent operator. 

In 1902 the Commission said in its report to Congress : 

The tendency to combine continues to be the most significant feature 
of railway development. The facts in this regard are matters of 
common knowledge, and little is gained by the mention of particular 
instances. * * * A law which might have answered the purpose 
-when competition was relied upon to secure reasonable rates is dem- 
onstrably inadequate when that competition is displaced by the most 
far-reaching and powerful combinations. So great a change In condi- 
tions calls for corresponding change in the regulating statute. 
6922 3 



34 

THE HEPBURN-DOLLIVER BILL. 

And «o, Mr. President, after all these years of legislative de- 
lay demoralizing private business and imposing grievous bur- 
dens upon the country, we are at last offered the Hepburn-Dol- 
liver bill. Does it meet the requirements of the country's com- 
merce? Does it promise a remedy? Let us examine its provi- 
sions. 

Mr. President, this bill will not solve the transportation prob- 
lem. Unless greatly strengthened, it will not meet the expecta- 
tions of the country. It will not dispose of the question. 

Why should we temporize? Why should we approach this 
subject on tiptoe, wKh apology to special interests and apos- 
trophe to property rights? Honest wealth needs no guaranty 
of security in this country. Property rightfully acquired does 
not beget fear — it fosters independence, confidence, courage. 
Property which is the fruit of plunder feels insecure. It is 
timid. It is quick to cry for help. It is ever proclaiming the 
sacredness of vested rights. The thief can have no vested 
rights in stolen property. I resent the assumption that the 
great wealth of this country is only safe when the millionaires 
are on guard. Property rights are not the special charge of the 
owners of great fortune. Even the poor may be relied upon to 
protect property. They have so little — the little they possess 
is so precious — that they are easily enlisted to defend the rights 
of property. 

No one here need offer himself as a martyr to protect the 
property of railway corporations against the results of popular 
clamor. Property rights are safe. The ample power of the 
Constitution is the everlasting bulwark of property rights. We 
can do nothing if we would to put the property of any corpora- 
tion in the slightest jeopardy. We shall do well indeed if we 
prevent the railway company from wronging the citizen. If 
we will use all the power we have under the Constitution, we 
may compel the carrier to desist from acts which encroach upon 
the rights of the citizen and community. We shall not be able 
to do more than that. We ought to be willing to do that much. 

Thirty years of experience, thirty years of struggle for legis- 
lation, thirty years of judicial decision plead with us, and yet 
we make no advance. The committees of Congress spend a 
decade listening to appeals, filing away petitions, taking testi- 
mony, hearing arguments, traveling over the same ground ses- 
sion after session. In the meantime individuals are wronged 
by extortionate rates and their business handed over to monop- 
olies enjoying the favor of the railroads. Towns and cities, 
with natural advantages and locations to make them commercial 
centers, are discriminated against to build up great markets 
and railway terminals at the end of the long haul. 

Men have grown gray in this protracted struggle to free the 
commercial highways from tyranny and bring the railroads of 
the country back to their legitimate business as common car- 
riers. Weary and heartsore they accept this bill, not because 
it is fair and just and goes to the core of the trouble, but, as 
they declare, " Because it is all we can get now. It is as far 
as Congress will go." 

I think it is demonstrated that every man charged with any 
official responsibility with respect to this legislation owes it as 
a public duty to go to the limit of constitutional power in cloth- 
6922 



35 

Ing the Government with authority to regulate railway rates 
and railway services. 

Mr. President, the bill before the Senate does not measure the 
importance of the subject to which it relates. The junior Sena- 
tor from Iowa, whose share in the framing of this bill author- 
izes him to speak for its scope, directed attention in his 
eloquent address to " the three conspicuous propositions with 
which this measure is concerned." 

First. Broadening the meaning of the word " transportation " 
to include independent car lines and refrigerator companies " by 
requiring that every charge incident to the service shall be 
reckoned as a part of the public rate." 

Second. By authorizing the Commission " where complaint is 
made that a rate is unreasonable or unduly preferential to re- 
quire the carrier to observe as a maximum in such a case the 
rate which, in its judgment, is in conformity with law." 

Third. Requiring " a detailed report of the business of the rail- 
ways compelling common carriers engaged in interstate com- 
merce to conform their systems of accounts to the regulations 
made by the Commission and to keep them open to reasonable 
inspection under public authority." 

Excepting, then, as this bill provides for the new device of 
the private car and refrigerator companies, it goes no further 
than to patch up the rents made by judicial decision and clarify 
and strengthen the section relating to the keeping of railway 
accounts, and reporting thereon. Hence it may be said that this 
bill is a measure to correct the blunders of 1887. 

Sir. it took thirteen long years of persistent and earnest effort 
to enact the statute of 1887. It is nine years since judicial 
decision took from that statute every element of protection 
which it had afforded the commerce of the country. The bill 
before us offers no more in fact — indeed less than did the Mc- 
Crary bill, the first measure which passed the House of Repre- 
sentatives for the regulation of interstate commerce in 1874. 

We have made some progress : We better comprehend now the 
consequences of handing over the commerce of the country to the 
control of railway corporations than we did then. It is for this 
reason, I repeat, that this* bill does not measure the importance 
of the subject to which it relates. The lesson which we have 
learned in the last generation of time is that the control of 
transportation is the control of commerce; that the control of 
commerce is the control of the commercial and industrial life 
of the American people ; that the control of the commercial and 
industrial life of the American people is the control of their com- 
mercial and industrial freedom ; that the control of their com- 
mercial and industrial freedom is the control of their political 
freedom; that this question, in its final analysis, goes to the 
integrity of our free institutions. 

I do not disparage this bill in its present form. I credit it 
with everything it can accomplish. It is fair to say that it will 
aid directly and indirectly to equalize rates ; that it will afford 
opportunity for associations and municipal organizations repre- 
senting communities where rates are higher than more favored 
localities to apply, on that ground, for relief. This will, in a 
limited way, result in some reductions. I say in a limited way, 
because only the larger, wealthier, more enterprising and ag- 
gressive communities will be represented by active organiza- 

6922 






36 

tions with the courage and the means to make a fight against 
the railroads for better rates. It will be further limited by the 
fundamental defect in the plan which provides no way of ascer- 
taining the reasonable rate, but only the comparatively reason- 
able rate, as I shall presently show. 

But beyond this the larger shippers will derive the principal 
benefit from the bill if it is enacted in its present form. As a 
class they are mainly interested in equal rates for all shippers 
within the zone of competition. They are quite indifferent as 
to the amount of the rate, because in the end they do not pay it. 
While their complaints would undoubtedly result in some inci- 
dental reductions, they will not be filed with the Commission 
primarily for that purpose. 

I protest that this is not a bill for the great body of the 
American people who constitute the consumers of the country. 
They do not buy freight of the railway companies at all. It 
has been suggested that the railroads have good cause to resent 
the designation of their charges as taxes upon the people. But 
they are taxes. 

There are just and unjust taxes. Any excessive charges for 
the transportation of the necessaries of life should be as care- 
fully guarded against as unjust taxes for sustaining government 
The Government is as truly obligated to protect the people 
from unjust freight charges as it is from unjust taxes to sus- 
tain the Government. Consumers do not deal directly with the 
carrier, and yet they pay practically all of the fifteen hundred 
millions collected by the railway companies annually for carry- 
ing the freight of the country. They pay this freight when they 
buy coal, lumber, clothing, and other supplies of the local dealer 
and merchant. The consumer does not know how much of the 
cost is a freight charge. He does know that prices are steadily 
advancing. He feels the increasing burden. He is certain that 
some one is wronging him. He believes that the railroads are 
directly responsible for a part of it and indirectly responsible 
for all of it. He wants relief. What does this bill do for him? 

He can not make complaint in his own behalf. He has not 
the detailed knowledge upon which to base such complaint, 
The items of overcharge, if he could specify them, are small, 
but in the aggregate they are important to him. He could not 
afford to institute proceedings for reduction if he were able to 
formulate the specific allegations of a complaint. 

If the legislation enacted at this session is to go no further 
than an endeavor to secure equal rates and not reasonable rates, 
then it ought to be so framed that there is some one upon whom 
rests an official obligation to act for the helpless consumer, for 
the millions who pay the freight. We should at least make an 
effort to secure equal rates for them until such time as we may 
secure reasonable rates for all. 

So long as the Commission, under the law of 1887, exercised 
the power of enforcing orders with respect to rates, which the 
railroads and the public understood the law conferred upon 
them, they issued and enforced such orders on investigations 
instituted upon complaints filed with them, and likewise upon 
investigations instituted upon their oion motion. One of the 
most important cases ever decided by the Commission, resulting 
in a reduction of rates upon foodstuffs, was upon an investiga- 
tion prosecuted by the Commission upon its own motion. 
6922 



37 

This bill limits the Commission's authority to make a deter- 
mination and issue an order to cases upon complaint. 

Section 13 of the law of 1887 authorizes the Commission to 
institute an inquiry upon its own motion. This bill allows that 
to stand, but in section 15, as proposed to be amended by this 
bill, it does not authorize the Commission to make a determina- 
tion and issue an order upon an investigation which it has 
conducted upon its own motion under authority of section 13. 
If it is wise to continue the authority of the Commission to 
make investigation, why is it deemed advisable to withhold 
from it the power to remedy any wrong disclosed by such 
investigation? 

Mr. DOLLIVER. Mr. President 

The VICE-PRESIDENT. Does the Senator from Wisconsin 
yield to the Senator from Iowa? 

Mr. LA FOLLETTE. Certainly. 

Mr. DOLLIVER. Consultation with the members of the In- 
terstate Commerce Commission has led me to believe that with 
their power of investigating general rate conditions throughout 
the country, if they discover an abuse they will be under no 
inconvenience whatever under the provisions of section 15 in 
founding a proper complaint. 

Mr. LA FOLLETTE. Mr. President, I noticed in the discus- 
sion in the House of Representatives that the member from 
one of the Maine districts raised that question and objected 
that there were provisions in this bill which might be so con- 
strued as to allow the Commission to issue an order upon the 
investigation which it had made on its own motion under sec- 
tion 13. I observed that a member of the House committee 
which framed the bill promptly declared that such construction 
could not be given to it. 

Mr. DOLLIVER. I think the Senator from Wisconsin will 
agree with me that if we can secure an adjudication of every 
complaint that may be filed, we will have gone a long way 
toward curing, or at least securing jurisdiction of, most railroad 
abuses. 

Mr. LA FOLLETTE. I am sorry to disagree with my friend 
the Senator from Iowa. I think we shall have gone only a 
very little way. Under the provisions of this bill I do not think 
we will go to the heart of this problem at all. I believe I shall 
be able to make this very clear, if Senators have the patience 
to hear me to the end. 

If consumers are to be greatly benefited by securing even 
relatively reasonable rates, it would seem very clear that either 
the Commission should be authorized to act upon its own mo- 
tion or the Government should provide some agency authorized 
to make preliminary investigation into the wrongs suffered by 
the consumers, file complaints, and prosecute the same before 
the Commission. Some communities and rural sections might, 
thus aided, secure at least a moiety of relief. 

The whole history of this struggle for legislation, reaching 
back more than a score of years, reveals the fact that those 
who are strong through the power of organization and wealth 
fare the best. 

Mr. President, it is on this broad ground of a just protection 
of public interest that the proposed bill seems to me narrow 
and far below the level demanded by experienced and en- 
6922 



38 

lightened public judgment. It is only designed to be amenda- 
tory of the law passed twenty years ago. In some respects it 
Is less effective than the original law was believed to be by 
those who enacted it — by the public and railroad companies as 
well. 

I will say, however, that in its amendments to section 20, with 
respect to the publicity of railroad accounts, I entirely and un- 
reservedly commend it. It contains excellent provisions for the 
inspecting of railway accounts and for greater publicity concern- 
ing them. But, excepting as to private car companies and a 
limited provision with respect to relative rates and orders, it 
ignores the lessons of experience and fails to recognize the 
existing commercial and industrial conditions. It stands and 
" marks time " on the old camp ground of twenty years ago. 

Sir, the bill takes little heed of the recommendations of the 
Interstate Commerce Commission to be found recorded in their 
annual reports to Congress. These recommendations are the 
result of nearly twenty years of accumulated wisdom in testing 
the law through administration. They should constitute the 
most valuable contribution to an intelligent solution of the great 
problem with which we have to deal. 

RECOMMENDATION OF COMMISSION FOB LEGISLATION NOT PROVIDED FOB 
IN THE PENDING BILL. 

I will present some of the more important recommendations 
for which this bill fails to make provision. I indulge the hope 
that the imperfections of the bill will be cured by amendment 
before it passes the Senate. 

1. VALUATION OF RAILWAY PROPERTY. 

The interstate-commerce law declares all unreasonable rates 
unlawful. The Supreme Court declares reasonable rates to be 
such rates as shall afford just compensation to the carrier for 
the services performed. The Supreme Court has likewise held 
that " just compensation " is a fair return on the fair value 
of the railroad property. 

The Commission has declared that — 

tto tribunal upon which the duty may be imposed, whether legislative, 
administrative, or judicial, can pass a satisfactory judgment upon the 
reasonableness of railway rates without taking into account the value 
of railroad property. 

In its report for 1903 the Commission recommended Congress 
to authorize such a valuation to be made, and made an elaborate 
argument in support of such recommendation. 

No such legislation has been enacted by Congress. 

This Mil makes no provision authorizing the Commission to 
ascertain the value of railroad property. 

I shall endeavor to discuss this most important branch of the 
subject with some thoroughness before I conclude. 

2. THE POWER TO REVISE AND FIX BATES., FABES., AND CHABGES. 

The Commission has recommended year after year that it is 
necessary to the protection of the public that authority be con- 
ferred upon the Commission, acting either upon its own motion 
or upon complaint, to issue, and to enforce an order changing 
any rates, fares, or charges alleged to be unreasonable or 
otherwise unlawful after due notice and full hearing, upon 
a determination by the Commission that the rates, fares, and 
charges are unreasonable or otherwise unlawful. 

The Commission informed Congress that these powers are 
** positively essential ; " that until conferred upon the Commis- 
6922 



39 

sion its " best efforts at regulation must be feeble and disap- 
pointing ;" that " knowledge of present conditions and tendencies 
increases rather than lessens the necessity for legislative action 
upon the lines indicated." 

The pending bill does not confer upon the Commission the 
broad powers to revise rates, fares, and charges upon its oxon 
motion, or to fix absolute rates, fares, and charges under any 
circumstances whatever. 

3. THE DELATION OF KATES. 

For years extended discussions have been presented to Con- 
gress showing the necessity of considering the relation of rates 
in determining with respect to specific complaints. The reports 
are full of cases showing how vital this consideration is in the 
administration of justice. 

The Commission has presented with great clearness and 
power its recommendations that this authority should be re- 
posed in the Commission. Indeed, it is difficult to see how it 
can proceed to discharge the duties of its high office and dis- 
pense any measure of justice under the limitations of the pro- 
posed bill, which confers no power upon the Commission to 
issue orders upon its own motion, unless Congress shall vest it 
with full authority to pass upon the relation of rates. 

This bill makes no provision granting such authority to the 
Commission. 

4. THE CONTROL OF CLASSIFICATION. 

The foundation of all rate making lies in classification. 
Sweeping changes are effected by a single order in classifica- 
tion, which the railroads make from time to time. The Com- 
mission has brought to the attention of Congress the fact that 
*' many advances have been brought about by changes in classi- 
fications." 

Changing the classification of an article of freight changes 
all the rates under which that article shall be shipped through- 
out the country. It is wholesale rate making. By comparison 
the powers proposed by this bill to be conferred on the Com- 
mission are only powers of retail rate revision to be exercised 
only on complaint and on the basis of comparisons with other 
rates fixed by the railroads. 

The Commission has repeatedly recommended that when 
classifications are filed which the Commission find on investi- 
gation and full hearing to be unreasonable, it shall determine 
what shall be a reasonable classification and prescribe the same, 
and shall order the carrier or carriers to file and publish, on 
or before a certain day, schedules in accordance with the de- 
cision of the Commission, subject to right of review thereon; 
that when such classification shall be so established it shall not 
he departed from without the consent of the Commission upon 
application of the carrier after due notice and full hearing. 

This bill makes no provision conferring such authority upon 
the Commission. 

5. THE POWER TO FIX A MINIMUM KATE. 

During the ten years that the Commission exercised their 
supposed power with respect to rates they found that great in- 
justice resulted in many cases because the railroad companies 
would readjust rates for competing towns to a common market, 
so as to defeat the orders of the Commission in securing to a 
6922 



40 

city or community a reasonable opportunity to compete in such 
common market 

This defect in the law was many times reported to Congress 
by the Commission and numerous cases cited in support of a 
recommendation that the Commission be given authority to fix 
a minimum rate. 

This bill makes no provision to correct the law in this im- 
portant respect. 

6. LONG AND SHOET HAUL DISCRIMINATIONS IGNORED. 

The long and short haul clause of the act of 1887 was designed 
to prevent a common form of most oppressive and unwarranted 
discriminations between places. The court has decided that this 
clause does not apply when the conditions are not alike at both 
points between which the discriminations exist. In practice 
there are no points at which conditions are alike. It lies in the 
power of the roads to make the conditions dissimilar whenever 
it suits their purposes. As a result this provision is without 
effect, and there is no authority in the Commission to prevent 
any such unwarranted discriminations. Such discriminations 
prevail generally throughout all sections of the country. 

Under the basing-point system a rate to a given point is com- 
puted by adding to the rate from the point of origin to the 
basing point the local rate from the basing point to the point of 
destination, or an arbitrary amount or a percentage of the rate 
to the basing point. This is done for points between the point 
of origin and the basing point, thus making the rate to such 
points higher than the rate to the basing point beyond. For 
example, rates on some commodities from New York to Salt 
Lake are more than twice as high as to San Francisco, a thou- 
sand miles farther and over the same line. From New Orleans 
to Charlotte, N. C, the rates are twice as high as to Virginia 
cities twice as far distant, the Virginia traffic passing through 
Charlotte. Most absurd discriminations of this sort prevail 
against Danville, Va. Shippers in western Wisconsin wishing 
to ship grain and live stock to Chicago are actually forced, to 
get the best rates, to ship west to St. Paul and then reship to 
Chicago, the return shipment passing through the town from 
which it started. 

The Commission has called attention to the defect in the law 
which permits these unwarranted discriminations. It has rec- 
ommended that it be given the power to determine what condi- 
tions are dissimilar and what discriminations are warranted. 

The proposed bill ignores these recommendations and the ne- 
cessity of their enactment mto law. It does worse than that; it 
reenacts the bad provisions of the old law. 

7. THE TRICK OF WITHHOLDING TESTIMONY. 

It is a fact that railway companies have withheld important 
testimony upon the hearings before the Commission ; that they 
have subsequently offered the testimony on the trial before the 
court, and have thereby succeeded in reversing and discrediting 
the Commission and in delaying the administration of justice ; 
that this practice has been so prevalent as to call forth rebuke 
upon the railroad companies from the Supreme Court. 

The Commission has reported these facts to Congress and rec- 
ommended that legislation be enacted to correct this abuse. 

This bill makes no provision to prevent the continuance of this 
wrongful practice on the part of the railway companies. 

6922 



41 

8. IMPEISONMBNT FOB VIOLATIONS OP LAW. 

The Commission advised against exempting railroad officers 
and agents from imprisonment for violating the law. The rail- 
roads advised Congress to amend the law and grant immunity 
from imprisonment. Congress adopted the recommendations of 
the railroads and passed the Elkins law, exempting railroad 
officers and agents from imprisonment for violations. 

In its report the Commission calls attention to violations of 
the Elkins law, and states that such violations are " liable to 
increase unless effectively restrained." 

This bill contains no provision restoring the penalty of im- 
prisonment and offers no remedy to " effectively restrain " such 
violations. 

9. THE KILLED AND INJUEED EMPLOYEES AND PASSENGEES. 

For the fiscal year ending June 30, 1905, the railroads killed 
and injured 10,617 passengers and 48,487 employees. The list of 
killed and injured of both passengers and employees has steadily 
increased from year to year. The record is an appalling one. 

We annually kill relatively three times and injure twenty-five 
times as many railway employees, and kill relatively six and 
one-half times and injure twenty-nine times as many passen- 
gers as do the Prussian railroads. 

Day after day we place those who are dearer to us than life 
in the safekeeping of the men who run the railroad trains of 
the country. Patient, courteous, watchful, brave — there are no 
stronger, finer types of character and courage in American life. 
Out on the " iron trail " these men grimly meet death, day and 
night, to save the trainload of humanity in their charge. The 
gruesome list of fatalities reveals the startling fact that more 
than one engineer out of every four dies upon his engine, his 
hand gripping throttle and lever. 

For seven years the trainmen of America have maintained a 
representative here to plead for legislation, giving a little meas- 
ure of justice to their families, when the dark hour comes, for 
which they ever wait with dread anxiety. For seven years 
their bills have died in the committee rooms of Congress. 

The Interstate Commerce Commission has each year urged 
legislation to reduce the long and increasing roll of this awful 
slaughter of employees and passengers. 

This bill makes no provision for the adoption of the Mock 
system, or other well approved safety appliances, or for any 
other progressive legislation, for the preservation of life. 

OTHEE CHANGES DEMANDED BY EXPEEIENCE AND PUBLIC INTEEEST 

THE INIQUITY OP THE FEEE PASS. 

The interstate-commerce law prohibited discriminations and 
made the issue and use of railroad passes unlawful. The law 
was weak and inefficient. It was evaded for a time and then 
openly violated. This vicious and insidious form of influenc- 
ing public sentiment and official action has been widely preva- 
lent for years. A prominent and experienced railroad auditor 
has stated that 10 per cent of all railroad travel in this country 
is upon free transportation. Those who pay to ride must bear 
the burden of this free transportation, amounting to over 
$50,000,000 annually. 

The free pass is furnished to public officers to influence offi- 
cial action. It may be accepted innocently, but, consciously or 
6922 



42 

unconsciously, It colors judgment and ultimately and finally con- 
trols action. 

No legislative body can act impartially upon any measure 
Involving contention between tbe railroads and tbe public wben 
sucb legislators accept and use free transportation furnished 
by tbe railway companies. 

Tbe late Collis P. Huntington spoke out of an abundant ex- 
perience wben be said of an official wbo was looking after legis- 
lation at tbe national capital tbat tbe gentleman bad "many 
advantages with bis railroads running out from Washington in 
almost every direction, on which he gives free passes to every- 
one whom he thinks can help him ever so little." 

Mr. Paul Morton says : " Passes are given for many reasons, 
almost all of which are bad." 

President Stickney, of the Chicago Great Western Railroad, 
said, in an address given in 1905 in this city, speaking of 
the provision of the interstate-commerce law against the use of 
free passes, that " Congressmen and Presidents, with rare ex- 
ceptions, have ignored its provisions." 

Whatever individual opinion may be entertained by Senators 
and Representatives upon this subject, the odium of violating 
laws which Congress has enacted ought in itself be sufficient to 
pass and enforce the most drastic legislation which can be 
framed, making it an offense punishable by imprisonment for 
anyone, be be public official or private citizen, to accept or use 
free transportation in any form. 

EXPRESS COMPANIES NOT INCLUDED. 

Every consideration that demands government regulation of 
the services and rates of railroad corporations demands tbe 
same regulation of the services and rates of express companies. 

The bill should be amended as to clearly include express com- 
panies. The hearings before the Interstate Commerce Commit- 
tee clearly established that there is just ground of complaint of 
these companies and need of effective regulations both as to serv- 
ices rendered and the rates charged. 

"fairly remunerative." 

The common carrier is entitled to make a just compensation. 
Just compensation is defined by the courts to be tbat compensa- 
tion which will afford the carrier a fair return upon a fair value 
of its property. Again and again it has been held that a rate 
which does not afford just compensation is not a just and reason- 
able rate. The phrase " just and reasonable " has a clear and 
well defined meaning in the law. It measures what the public 
must pay. It measures all that the carrier is entitled to receive. 

But the pending bill introduces a new qualifying term by 
which the carrier's rate is to be measured. The words " fairly 
remunerative " are added. What office are they to serve? For 
what purpose are they introduced? Are they to add something 
to the rate? If that is the purpose, they should be stricken from 
the bill. The carrier is entitled to nothing more than a just and 
reasonable rate. If the words " and fairly remunerative " are 
not designed to increase the rate, then they serve no purpose 
and should go out. These words introduce another element over 
which there will be controversy in the courts. The words will 
require judicial construction. For every reason they should be 
omitted. 

6922 



43 

Mr. DOLLIVER. Mr. President 

The VICE-PRESIDENT. Does the Senator from Wisconsin 
yield to the Senator from Iowa? 

Mr. LA FOLLETTE. Certainly. 

Mr. DOLLIVER. Mr. President, I wish to say that those 
words were suggested to the Senate Interstate Commerce Com- 
mittee by the Interstate Commerce Commission in the bill which 
they framed and forwarded to us. For myself I think I ought 
to say that they are after mature deliberation omitted from 
the bill which I had the honor to introduce. 

Mr. LA FOLLETTE. I am glad to learn that the Senator 
is not personally in favor of incorporating into the bill the 
added words. 

Mr. President, perhaps I ought to say, with reference to the 
recommendation of the Interstate Commerce Commission at 
this session of Congress, as indicated and limited by the draft 
of a bill which was printed as coming from them, that I con- 
cede freely that it omits many of the recommendations which 
they have made year after year for a decade as being vital to 
the protection of the interstate commerce of this country. 

I know that back of that change and other changes in their 
recommendations there is a world of significance. Since 1897 
they have submitted their reports to Congress, always urging 
the same legislation as vitally necessary. They have appeared 
personally before the committees of Congress, arguing and 
pleading to have their recommendations enacted into law. If 
at last they have been driven to believe that they must take 
this bill or nothing, that they must take but a little fraction of 
that which is really essential to protect the people of this coun- 
try against extortion and abuse, it does not annul, contradict, 
or overturn the recommendations which they have incorporated 
year after year for ten long years in their reports and urged 
in person upon the committees at every opportunity. I could 
say much more with respect to this matter. It is not neces- 
sary to do so at this time. 

Attention is called to other changes that seem worthy of con- 
sideration when the bill is taken up in detail. 

The bill, in extending the time for notice of changes in rates, 
provides that the carrier making such notice shall give " pub- 
lic notice." The word " public " would seem indefinite. Pro- 
vision for notice to the Commission is not provided. In ex- 
tending the time for notice of changes in rates in joint tariffs 
*' public " is omitted and notice to the Commission is provided. 
It would seem that in both cases public notice and notice to 
the Commission should be required and the manner of public 
notice specified. 

To empower the Commission to issue orders after full hear- 
ing and investigation upon its own motion, the words " upon 
complaint " should be omitted in the amendment to section 15. 
The scope of such orders should include all classifications and 
regulations affecting rates and services. 

Likewise the Commission should be empowered, when any 
rate or classification has been found unreasonable or unjust, to 
substitute maximum, minimum, or absolute rates, or to substi- 
tute such other classification or regulation as shall be necessary 
to secure just rates and regulation in conformity with the re- 
quirements of the law. 
6922 



44 

In the amendment proposed to section 16 it provided that 
when " upon such hearing as the court may determine to be 
necessary, it appears that the order was regularly made and 
duly served," the court shall enforce obedience to such order. 
This provision may be construed as limiting the court to con- 
sideration of the regularity of making and serving the order Y 
and to exclude consideration of the question whether the order 
is confiscatory. Any doubt with respect to this provision can be 
remedied by inserting after the word " served " the words " and 
not in violation of any of the constitutional rights of the car- 
rier." 

In addition to the specific enumerations in the bill, the report 
should show separately the receipts from and the operating 
expenses for interstate and State traffic. The report should 
show, in such detail as the Commission may direct, the amount 
and character of the freight and passenger traffic, and the hours 
of labor of all employees, and to what degree certain classes 
of employees are required to be on duty continuously for such 
length of time as may jeopardize the public safety. 



Friday, April 26, 1906. 

Mr. LA FOLLETTE. Mr. President, when I concluded, late 
in the session yesterday, I was discussing certain features of 
this bill which seemed to me very defective, and I wish briefly 
at the outset this morning to review the propositions covered in 
what I said yesterday. 

I had considered what I conceived to be unsound constitu- 
tional arguments. I had discussed what seemed to me to be 
unsound propositions which would limit the right of Government 
to base its control of transportation upon franchises issued by 
the sovereign power. I had discussed the broad court review 
and preliminary injunction. I had called attention to the 
history of the movement which culminated in the passage of 
the act of 1S87. I presented for consideration the weakness 
and lack of vitality of that statute, and the urgent need of its 
amendment. 

Following that, Mr. President, I traced briefly the develop- 
ment of industrial combination in this country and showed, 
as I believe logically, its relation to transportation. I think it 
was made plain that all of the industrial and commercial cen- 
tralization of this country is closely related to the transporta- 
tion problem. I submitted the recommendations and argu- 
ments of the Interstate Commerce Commission which it had 
presented to Congress session after session to secure legisla- 
tion to control transportation charges and regulate service, to 
the end that industrial and commercial monopoly should na 
longer be fostered by especially favored transportation rates 
and regulations. I believe it was made clear that the country 
had suffered greatly because Congress had failed to respond to 
the recommendations made by the Interstate Commerce Com- 
mission with respect to the constantly increasing power of mo- 
nopoly through railway concessions and privileges. 

And then, Mr. President, coining down to what we are try- 
ing to do here to-day, I had begun to suggest the particular 
6922 



45 

respects in which the pending bill fails to meet the recom- 
mendations of the Commission and the urgent needs of the com- 
mercial and industrial interests of the country. 

I called attention to the fact that the Commission had recom- 
mended the valuation of railroad properties, and that this bill 
does not provide for it; that they had recommended the power 
to revise and fix rates and fares and charges upon their own 
motion, and that this bill does not provide for it; that they 
had recommended and had cited many cases showing the abso- 
lute necessity of conferring upon the Commission power to con- 
trol the relation of rates, and that this bill does not provide for 
it ; that they had made plain to the Congress and to the country 
the importance of giving the Commission authority over classi- 
fication, and that this bill does not provide for it ; that they 
had cited innumerable instances where it was important to the 
administration of justice with respect to the commerce of the 
country that they should have authority to fix minimum rates 
or an absolute rate, and that this biM does not provide for it ; 
that they had pointed out the ability of the railroads of this 
country to nullify that section of the statute of 1887 with respect 
to the long and short haul clause, and that this bill does not 
in the least strengthen it. 

Mr. President, in the course of this discussion the Commission 
has been much criticised because so many of its decisions have 
been reversed in the courts. The true reason for these re- 
versals may be found in the annual reports of the Commission 
to Congress. Attention has again and again been directed to the 
fact that the railroad companies withheld testimony upon the 
trial of the case before the Commission and then introduced it 
when it came to a trial of the case before the court. Upon this 
new evidence the court often reversed the Commission. The 
railroads were thus enabled to embarrass the Commission and 
delay the administration of justice under this law. These re- 
versals have often been cited on the floor of both Houses of 
Congress as showing the incompetence of the Commission. 
Yet the reports of the Commission to Congress have recom- 
mended that the law be so amended as to prevent this practice. 
This bill does not contain any such amendment. 

Then, Mr. President, I called attention to the fact that the 
Interstate Commerce Commission had questioned whether great 
injury would not result from so amending the law that no 
imprisonment should be imposed as a penalty for its violation ; 
but that the railroad companies had for years pleaded before 
the committees here in Congress that imprisonment as a pun- 
ishment for violation of the law might be abrogated. The 
Commission, in its reports and before the committees of Con- 
gress, gave admonition and warning that such amendment 
would in all human probability result in opening the doors 
wide for violation of the law. But Congress heeded the insist- 
ence of the railroad companies that imprisonment for viola- 
tion of law should be abrogated, and the Elkins law was passed. 

Mr. FORAKER. Mr. President 

The VICE-PRESIDENT. Does the Senator from Wisconsin 
yield to the Senator from Ohio? 

Mr. LA FOLLETTE. I do, sir. 

Mr. FORAKER. I understand the Senator from Wisconsin 
to be saying that the provision of law abrogating imprison- 

6922 



46 

ment for violation of the interstate-commerce act was contrary 
to the recommendation of the Interstate Commerce Commis- 
sion. Am I correct? 

Mr. LA FOLLETTE. I say this : After long years of pleading 
with the Committees on Interstate Commerce of both Houses, 
the Interstate Commerce Commission has been pushed from 
position to position with respect to its recommendations. 

Mr. FORAKER. Mr. President 

Mr. LA FOLLETTE. Wait a moment. I say that finally, 
after warning Congress that the abrogation of punishment by 
imprisonment would, in its judgment, be a dangerous thing, the 
Commission finally said if, in the opinion of Congress, it is 
deemed advisable — I am not quoting the exact words of the 
Commission, of course — we yield that point. I say that means 
this, and this only : The Commission has been pushed by the 
attitude of the committees of Congress from pillar to post, and 
that finally, in its extremis, it was ready to accept almost any 
legislation which it could get, provided it contained some pro- 
visions that would tighten up and make more stringent certain 
of the sections with respect to violations of the law. 

Mr. FORAKER. Mr. President 

The VICE-PRESIDENT. Does the Senator from Wisconsin 
yield further to the Senator from Ohio? 

Mr. LA FOLLETTE. I do. 

Mr. FORAKER. The Senator well said that he was not 
quoting the exact language of the Interstate Commerce Com- 
mission in what he has just now set forth. The fact is, as any- 
one can ascertain by reference to the official reports of the 
Interstate Commerce Commission, that repeatedly prior to the 
act of February, 1903, known as the " Elkins law," the Commis- 
sion recommended that the law be so changed as to do away 
with imprisonment for offenses against it In their seventeenth 
annual report, which was the first report after that law had 
been enacted, they dwell upon that and call attention to the 
fact that the change in the law was in accordance with their 
recommendation, made repeatedly on their own motion, without 
any desire on the part of anybody, so far as I am aware, that 
they should make it, and they speak of that provision of the 
law as one of its exceptionally good features. 

Now, I do not want to interrupt the Senator from Wisconsin 
while he is in the midst of his argument 

Mr. LA FOLLETTE. It is all right. 

Mr. FORAKER. Will the Senator allow me to read one 
paragraph? 

Mr. LA FOLLETTE. Oh, yes. 

Mr. FORAKER. That is all I want. 

Mr. LA FOLLETTE. I will consent to that. 

Mr. FORAKER. I should think the Senator would not object 
to that. 

Mr. President, the Commission, in the course of their dis- 
cussion of the Elkins law, the whole of which, notwithstanding 
the Senator's familiarity with it, I commend to him for reread- 
ing, say this : 

The amended law has abolished the penalty of Imprisonment, and 
the only punishment now provided is the imposition of fines. As the 
corporation can not he imprisoned or otherwise punished for misde- 
meanors than by money penalties, it was deemed expedient that no 
5922 



47 

greater punishment be visited upon the offending officer or agent. The 
various arguments in favor of this change have been stated in former 
reports and need not here- be repeated. Whether the good results 
claimed by its advocates will be realized is by no means certain, but 
the present plan should doubtless be continued until its utility is 
further tested. 

And so they go on at considerable length, showing, as refer- 
ence to their former reports shows, that they have been on 
their own motion repeatedly recommending that identical legis- 
lation before ever it was enacted by Congress. 

Mr. LA FOLLETTE. Mr. President, I deny that the report 
read by the Senator or any of the reports of the Interstate 
Commerce Commission recommend the abolition of imprison- 
ment as a penalty for violation of the law. I assert that they 
have always maintained in their reports to Congress, notwith- 
standing the insistence of the railroad companies that it should 
be done, they doubted that it would be the means of bringing 
into court offenders against the law, which the railroad com- 
panies always professed to believe, in trying insidiously to 
get the committees of Congress to incorporate into the law the 
provision that punishment by imprisonment should be abro- 
gated. The arguments referred to in previous reports are the 
arguments of the railroads, not the arguments of the Commis- 
sion. I furthermore assert that in the last report made by the 
Interstate Commerce Commission, the report for 1905, they say 
that whatever they have said heretofore in commendation 
of the Elkins law they now desire to qualify. I am not quot- 
ing their language, but its import. Oh, I know, Mr. President, 
that it will be possible for the Senator from Ohio [Mr. Fob- 
aker] — and he has already done so — as it will be possible for 
other Senators here to quote the Interstate Commerce Com- 
mission in approval of the Elkins law. I know it will be pos- 
sible to quote Mr. Bacon, from my own State, and Mr. Cowan, 
of Texas. 

Mr. President, I am impelled by the interruption to say that 
the records of Congress show that for nine years the Interstate 
Commerce Commission has cooled its heels around the cor- 
ridors and about the doors of the committee rooms of Con- 
gress. Cowan, of Texas; Bacon, of Wisconsin; Call, of Cali- 
fornia — any number of men have been here pleading for 
legislation that would relieve the commerce of the country from 
the oppression under which it suffers. 

And when finally this committee or the committees of Con- 
gress reported favorably the Elkins law, it occasioned a good 
deal of rejoicing among those men. It is possible to quote 
from Bacon and Call and Cowan and the Interstate Commerce 
Commission in commendation of the Elkins law. That is true ; 1 
concede that. The stir of lrfe in the recesses of the committee 
room having charge of this legislation, of which the report of 
that measure gave evidence, was a great encouragement to 
these gentlemen, who had waited about here and had made their 
arguments, who had shown that the industries of this country 
were being oppressed, who had shown that the commerce of the 
country was languishing under the burdens imposed upon it 
by the railroads. 

I say it was natural, Mr. President, that they should give 
some manifestations of joy that there had finally issued from 
the committees of Congress having charge of this subject of 
6922 



48 

legislation evidences of life and interest. They had waited for 
nine or ten years, and they said many things at that time, the 
Commission said some things in their reports, which a careful 
reading of subsequent reports will show they are now seeking 
in a measure to qualify or retract. Take the very last report 
of the Commission, that for 1905, which is just laid on the 
desks of Senators. I do not quote its exact language, but it 
says, in substance, that many of the commendations heretofore 
given now have to be qualified. The Commission are coming 
to understand that the Elkins law did not do what they be- 
lieved and hoped it would do ; that it did not stop the payment 
of rebates ; that it did not prevent the granting of privileges. 

Mr. President, let me say that an investigation made while I 
had the honor to be governor of Wisconsin with respect to the 
effect of the Elkins law resulted in some important and star- 
tling disclosures. 

In Wisconsin since 1854 the railroads, under a law which 
they succeeded in passing through the Wisconsin legislature, 
have paid taxes based upon their own report to the State of the 
amount of their gross earnings. You can see very readily that 
this law would give the railroad companies of that State the op- 
portunity to determine for themselves the amount of their taxes. 
If they chose to report their gross earnings at a sum less than 
they actually were for the business of the State, they could 
correspondingly reduce their taxes. 

Strongly suspecting that this was being done, by special mes- 
sage I urged the legislature of the State to authorize investi- 
gations into the books and accounts of the railroad companies 
doing business in Wisconsin to find out whether they were re- 
porting the full amount of their earnings. That was during the 
session of the legislature of 1903. That was just about the time 
of the passage of the Elkins law, which was approved on the 
19th of February, 1903. 

The legislature passed the law providing for such an investi- 
gation, and under it there were installed by the State, in the 
principal offices of the railroad companies doing business in 
Wisconsin, experts to examine their books, and determine 
whether they were reporting their full earnings to the State of 
Wisconsin. Of course that took the cover off completely. 

Now. Mr. President, it was disclosed by this investigation that 
the railroads had withheld, in reporting for taxation their gross 
earnings on Wisconsin business, over a period of six years, more 
than ten and one-half million dollars ; and of this amount more 
than $7,000,000 were deductions for rebates paid in violation of 
the interstate-commerce act and the Elkins law. Of this 
amount, $6,180,000 was rebates on freight and $972,000 was re- 
bates on passenger traffic. 

This investigation was begun on October 1, 1903, and contin- 
ued through that year and through the year 1904. The Elkins 
law went into effect on the 19th of February, 1903. The amount 
of rebates shown by this investigation to have been paid by 
one of the leading roads, on Wisconsin business alone, month 
by month through the year 1903, was, in round numbers, as 
follows : 

January $37,000 

February 1 57, 000 

March 47, 000 

April 36,000 

6922 



May $25,000 

June 13, 000 

July 101,000 

August 32,000 

September 46, 000 

October 9. 000 

November 666 

December 2,032 

Mr. President, notwithstanding that the Eikins law went into 
effect February 19, more rebates were paid in February than in 
January, and more were paid in March than in January, and in 
July nearly three tunes as much was paid in rebates as in Jan- 
uary ; and the rebates only began to diminish, not in obedience 
to the Eikins law, but in recognition of the fact that there were 
experts from Wisconsin looking into their books. From the be- 
ginning of the investigation, October 1, the rebates were very 
perceptibly reduced. 

Furthermore, Mr. President, the investigation showed that one 
of the leading roads paid more in rebates in 1903 than it had 
paid in 1902 ; while the other leading road doubled its rebates in 
1903, paying that year $200,000 more rebates than in the year 
before the Eikins law was passed. 

So I say, Mr. President, we have there in that one State 
indubitable evidence, admitting contradiction from no man, 
of the failure of the Eikins law as a restriction on the payment 
of rebates or the granting of privileges. 

I agree with what I contend is at least the strong intimation 
of the Interstate Commerce Commission, that taking away all 
authority to administer punishment by imprisonment is mani- 
festly one of the reasons why the railroad companies have 
violated the Eikins law with impunity. 

So I say, Mr. President, that the Interstate Commerce Com- 
mission does well in modifying its former indorsement of the 
Eikins law. Study their reports carefully and you will see 
that they are getting away from the unqualified approval which 
they gave it the first two years after its enactment. The time 
will come when they will be obliged to confess that they were 
mistaken in everything they said in approval of it — very nearly, 
not entirely ; there are good provisions in it ; but so far as 
stopping rebates is concerned it has failed. 

The demonstration made by the investigation of the rail- 
roads doing business in Wisconsin was that the rebates in- 
creased after the Eikins law was passed. The penalty of im- 
prisonment had been taken away. That is what was the mat- 
ter. That is what the railroads insisted upon before the com- 
mittees of Congress, and that is what, if you will read with 
fairness the recommendations of the Interstate Commerce Com- 
mission, the Commission had urged should not be done. But 
that is what the committees finally did, and as the result of it 
you have, as shown by the investigation of the railroad com- 
panies' books with respect to business done in Wisconsin, an 
increase of the payment of rebates under the Eikins law ; and 
I have reason, as a result of that investigation, to asse/:t my 
belief that the payment of rebates has increased under the 
Eikins law rather than diminished. I believe that ultimately 
an investigation of that subject will drive every man whose 
mind is open to honest conviction to that conclusion. 

Mr. President, I started out at the opening of my remarks to 
recapitulate what I had said yesterday in order to get back to 
6922 4 



50 

a point of beginning for to-day. So I must not give way to the 
call which every one of these questions and issues makes upon 
me to digress into the field of discussion of this great question 
which in every phase is as broad as the country, and which 
goes deeply and vitally into the interests and lives of all the 
people. 

Mr. President, I find here upon my desk one of the passages 
in the last report of the Commission, issued December 14, 1905, 
for which I sought a few moments ago in my notes. It reads 
as follows: 

In our annual report for 1903 we endeavored to explain the changes 
in the regulating statute effected by the Elkins law, so called, which 
was approved in the previous February, and made some favorable com- 
ments upon its operation. A similar opinion was expressed in the 
report made a year ago. Further experience, however, compels us to 
modify in some degree the hopeful expectations then entertained. Not 
only have various devices for evading the law been brought into use, 
but the actual payment of rebates as such has been here and there 
resumed. 

Mr. FORAKER. Mr. President 

The VICE-PRESIDENT. Does the Senator from Wisconsin 
yield to the Senator from Ohio? 

Mr. LA FOLLETTE. I do, sir. 

Mr. FORAltER. Will the Senator read the whole of that 
paragraph ? 

Mr. LA FOLLETTE. Well, I do not know how extended 
it is 

Mr. FORAKER. The next two or three sentences. 

Mr. LA FOLLETTE. It may go clear through the report. 

Mr. FORAKER. No ; there are only two or three other sen- 
tences. If the Senator will allow me, I will read them. 

Mr. LA FOLLETTE. I will read them. 

Mr. FORAKER. I have them before me. 

Mr. LA FOLLETTE. I will say to the Senator from Ohio I 
will read them. 

Instances of this kind have been established by convincing proof, on 
which prosecutions have been commenced and are now pending. More 
frequently the unjust preference is brought about by methods which 
may escape the penalties of the law, but which plainly operate to de- 
feat its purpose. This does not imply any want of satisfaction with 
the act of 1903, which we regard as a most admirable measure, nor 
any belief that there is a geueral return to former practices, for the 
fact is undoubtedly otherwise ; but it does mean that this type of 
evil has by no means disappeared and that it is liable to increase unless 
effectively restrained. 

Let me say to the distinguished Senator from Ohio that when 
the Interstate Commerce Commission have had the opportunity 
to investigate the books of the railroad companies as freely and 
thoroughly as we have in Wisconsin with respect to Wisconsin 
business they will not put any reservations upon their language 
as they did there. 

Mr. FORAKER. Mr. President 

Mr. LA FOLLETTE. They will easily be driven to the posi- 
tion that the violations of law under the Elkins Act with re- 
spect to discriminations have not been checked or stopped at 
all. Indeed, Mr. President, as shown by the patient and care- 
fn\ investigation made by the experts of Wisconsin they in- 
creased under the Elkins law. And let me say this 

Mr. FORAKER. Mr. President 

The VICE-PRESIDENT. Does the Senator from Wisconsin 
yield to the Senator from Ohio? 
6922 



51 

Mr. FORAKER. Will the Senator allow me to ask him one 
question before he gets away from that subject? 

Mr. LA FOLLETTE. Oh, certainly. But I will not get away 
from it ; I like it. 

Mr. FORAKER. Would the Senator expect evil practices to 
cease without an enforcement of the law? The law by itseUf 
being simply put on the statute books could not, of course, break 
up anything. 

Mr. LA FOLLETTE. Yes, Mr. President; I would expect 
the eminent gentlemen who are running the railroads of this 
country to obey a law passed by Congress which makes an act 
of theirs criminal before they have been called to the bar of the 
court to answer in a criminal proceeding. 

t remember a few days ago in the discussion here that the 
Senator from Ohio rose in his place and said to some one — I do 
not remember who it was — that the railroad officials of this 
country are not criminals. I say to the Senator that the rec- 
ords, so far as they have been exposed, show that the railroad 
officials of this country are, with rare exceptions, criminals un- 
der the statute. 

Now, I mean what I say. I see Senators on that side smile ; 
but let me say to you, gentlemen, that when in Wisconsin we 
summoned the railroad companies into court to answer for hav- 
ing juggled the reports of their annual gross earnings, which 
they were required by law to make under oath to the State 
official, when they appeared before the court and the testimony 
of the State was but partly offered, when the arguments over 
certain law propositions had been concluded, those officials — 
and they are just as honorable as the officials of any railroad 
companies in the United States — came into court and stipu- 
lated that they had violated the law, and went to the supreme 
court on a question of the statute, as to whether or not, to state 
it specifically, their report to the State officer and its accept- 
ance by that officer, even if the report was a violation of the 
statute, had not bound the State. That is what they did. They 
confessed a violation of the statute ; they confessed having 
under oath reported their gross earnings short of the true 
amount as required by the statute ; and they are just as honor- 
able as the railroad officials of any State in this Union. 

Mr. President, before I concluded yesterday I called the at- 
tention of the Senate to the list of killed and injured in this 
country — railway employees and passengers — and I presented 
the facts to show that such accidents are many times more 
numerous here than in Prussia, where the railroads are operated 
in the interest of the public welfare ; and I ask, on that ground, 
consideration for an amendment which I shall offer before this 
bill is disposed of to prevent this needless destruction of life and 
limb. 

I also called attention, Mr. President, to certain other defects 
where amendments, it seems to me, are required in the pending 
bill, if it is to be within constitutional limitation and if it is to 
be made effective for the protection of the commerce of this 
country. 

I do not reflect upon any of the gentlemen who have prepared 
this bill, but I desire to ask members of the Senate who would 
see a measure framed that shall in all its provisions be guarded 
with respect to constitutional violations to scan every line and 
section of it. 
6922 



52 

And now I come, sir, to a more extended discussion of cer- 
tain powers which should be conferred upon the Interstate Com- 
merce Commission. 

BROAD POWERS DEMANDED. 

Reason and experience alike compel the conclusion that any 
supervision or regulation of railway rates or services, to be of 
material benefit to the public and adequate protection from 
railway abuses, must be the fullest and most complete regula- 
tion. It must not stop with conferring authority to prevent 
only a part of the evils of which there is complaint. It must 
meet and satisfy all just complaints. It must anticipate those 
devices of the future which would seek to circumvent and de- 
feat its purpose. Unless it does these things, it will be found 
in the hour of need that it is too weak to prevent even those 
abuses against which it is directed. 

To attain these ends, broad powers must be conferred upon 
the Commission. It must be assumed that the Commission in 
its exercise of these powers will not exceed that which is wise 
.and necessary in the public interest. The Commission is ac- 
countable in the event of any such excess or abuse of power 
to the courts and to the public. 

To accomplish these results the system of regulation must be 
right in principle ; it must rest on the broad foundation that the 
Government shall possess powers of correction coextensive irith 
the railway corporation's powers of abuse. Whenever the rail- 
road makes, in respect to its service, any rates, classification, or 
regulation whatsoever which are unjust or unreasonable as com- 
pared with any other rate or regulation or which are of them- 
selves unreasonable or excessive, or does any other thing or pur- 
sues any policy at variance with the public interest and the gen- 
eral welfare, then the Government should have and exercise 
the power to set aside and prohibit such injustice or abuse and 
institute and enforce in lieu thereof any other rate, classifica- 
tion, regulation, thing, or policy that will best subserve the 
general welfare. 

Whatever powers are conferred, their exercise should not in 
any mannor be made solely to depend upon the complaints of 
any individual or elass of citizens. In the benefits of this legis- 
lation all are entitled to share. The welfare of all the people 
as consumers should be the supreme consideration of. the Govern- 
ment. It should be the chief concern of the Commission. 

I am driven to protest against the attitude in which the pro- 
posed bill approaches the subject of railway regulation. The 
bill has been heralded to Congress and to the public as a meas- 
ure to increase the powers of the Interstate Commerce Commis- 
sion and to confer upon the Commission the authority and the 
power to enforce the provisions of the interstate-commerce act 
that all rates shall be just and reasonable. In fact, the bill, if 
passed in its present form, will not so increase the powers of 
the Commission. The provisions which should be in this bill 
to that end are made conspicuous by reason of their omission. 

Even this bill, with its powers limited to a provision for 
publicity and for equalizing relatively unfair rates on complaint 
only, meets with formidable opposition in this Senate. Senators 
have contended in debate, day after day. that even these powers 
should not become effective without providing that every order 
6922 



5S 

of the Commission should in every item and particular be com- 
pletely retried and reheard, de novo, in the courts. 

If we view this attitude with the utmost consideration and 
respect for its exponents, the best we can say of it is that it 
expresses profound distrust of any system of Government regu- 
lation of railroads. The logical conclusion of such a position is 
that it is unsafe to confer upon the Commission the powers that 
are vital and essential to any system of regulation in the public 
interest that will reach and correct unreasonable and unjust 
rates. The distrust that results in the omission of vital and 
essential powers from the bill differs only in degree from the 
distrust that would prevent any powers conferred from becom- 
ing effective. 

The effort that seeks to prevent the real exercise of any ad- 
ditional power has at least the merit of consistency with the 
attitude of distrust, to which it is a response. If the Commis- 
sion can not safely be intrusted with the power to regulate 
rates with respect to their reasonableness, it can not safely be 
intrusted with the power to determine the relation of rates of 
which it may receive complaints. If we apprehend that the 
Commission will not exercise a given power wisely and in good 
faith, that power should not be conferred, whether it be great 
or little. Any legislation which does not proceed upon the basis 
that it is a wise, just, and safe exercise of legislative power 
can not achieve any enduring good. Without these supporting 
considerations, such legislation can be urged only on grounds 
of political expediency. But let no man be misled by the ex- 
pectation that any half-way measure will serve even the end of 
political expediency. The public will not accept from its serv- 
ants any compromise of the full discharge of their official obli- 
gation. It experienced one great disappointment in railway 
legislation, which failed to enact that which was demanded by 
the conditions and that which it was supposed to enact. It 
will not require another ten years to discover the deficiencies 
in this legislation. They will be recognized at once. 

THE EELATION OF EATES. 

That powers to regulate the relation of rates and to determine 
rates for the future, if conferred, would not be exercised by the 
Commission wisely and in good faith, is suggested on every 
hand. The magnitude of such power is urged against intrust- 
ing it to the Commission. The Senator from Iowa [Mr. Dol- 
liver] indorses the decision of the court in the Maximum Rate 
case, not only as a correct interpretation of the language of the 
statute, but also because that decision, in his opinion, stopped 
the Commission from the further exercise of the great and 
dangerous powers — 

To bring into judgment a score of railways, serving different sections 
of the country, and a hundred cities seeking access to the same market, 
and to balance their claims and pass sentence upon their commercial 
opportunities. 

No one can dispute with the Senator the magnitude of this far- 
reaching power. But is this power of any less magnitude or 
capable of any more dangerous application when exercised by 
railroads than if exercised by the Commission? He says 
further : 

We are not, therefore, attempting to restore the power which the 
Commission lost by that decision. No careful student of this problem 
6922 



54 

would do that if he could, and no Congress, In my opinion, will ever 
enact a law to take the development of widely separated regions, the 
interests of competing markets, the growth of rival seaports contend- 
ing for the prizes of the ocean, out of the hands of the railways, which 
have grown up with them, and the natural laws of business which have 
created them, and stake their worldly prospects on the decision of any 
earthly tribunal, even if its salary were raised to correspond with the 
size of such a job. 

Just what distinction can be made between tbe exercise of 
tbis power by tbe railroads and its exercise by a Government 
commission? It is clear tbat sucb a commission would be an 
" earthly tribunal." Are we to conclude that there is some- 
thing more than earthly about railroad managers ; that they, 
perhaps, exercise these enormous powers by some divine right 
and interpret the " laws of business " under the guidance of 
divine inspiration? 

I submit that we can not progress in this legislation on any 
other basis than on the assumption that the powers proposed to 
be conferred will be exercised honestly and in good faith. At 
the worst those intrusted with the exercise of these powers will 
be agents of the Government and accountable to the Govern- 
ment, to the public, and to the courts for any misuse of their 
power. A private railway management is accountable to no 
one. All the outrages chargeable against any form of manage- 
ment or possible to commit in the conduct of the transportation 
business of the country have been repeatedly and constantly 
perpetrated by our free and unregulated railway managements 
without accountability and with scarcely even so much as any 
attempt at concealment. The experience of the American pub- 
lic in its efforts to secure fair treatment at the hands of the 
railroads has been a record of the most bitter disappointment. 
It is inconceivable that on this record there should be an appeal 
to the people against Government -regulation on the ground that 
such regulation might be administered in subservience to selfish 
ends and not in the interest of tbe general welfare. 

There is nothing in the record of railway domination of the 
industrial development of this country which should deter us 
from taking that domination " out of the bands of the rail- 
ways." On the contrary there is much to demand such action. 
The mainspring of the railway policy that decides which 
centers shall succeed and which shall fail, is the selfish interest 
of the carrier. It has no concern in the promotion of commerce 
in the public interest. The social economy of serving a given 
territory from the center which would serve it best and 
cheapest, the economy of the multiplication of convenient 
centers of trade and industry, of the building up of many small 
cities well distributed over the country, is wholly disregarded. 
It does not suit the schemes of the traffic managers. Their 
aim is the long haul, the big tonnage, the large revenues, and 
the dividend. To these considerations all else is sacrificed. 

In the interest of this policy the bulk of the country's com- 
merce is centralized for distribution at four points across the 
continent, the Atlantic coast, the head of the Great Lakes, 
the Missouri River, and the Pacific coast. The railroads are 
fighting every interior center between the Atlantic coast and the 
head of the Great Lakes ; every center between the Great Lakes 
and the Missouri River; every center between tbe Missouri 
River and the Pacific coast. Only where water competition 
enters to restrain the rapacity of carriers is there peace or feel- 
6922 



55 

ing of security. From the Southeast to the Northwest the com- 
plaints come; and from the Northeast to the Southwest. In 
every locality it is the most important industries and lines of 
trade that are attacked and are suffering. 

A few of these oppressed interior localities have laid their 
grievances before the committees of Congress. They are merely 
types of scores of communities similarly situated. These, how- 
ever, are important of themselves, and of vast significance. 
For the most part they are cities of considerable size, and rep- 
resent large sections of country. These cities are distributed 
from the Atlantic coast to the Pacific. There is Danville, in 
Virginia; Atlanta, in Georgia; Nashville, in Tennessee; St. 
Louis, in the Mississippi Valley ; Denver, on the Great Plains ; 
and Spokane, in the Far West. They simply represent types. 

The smaller places do not complain so much — not because 
they do not suffer; they suffer most, as a matter of fact — but 
because they are without commercial organization and without 
recourse in their industrial plight. 

The complaints of shippers and representative citizens be- 
fore the committees of Congress showed in detail the nature of 
the discriminations between localities. It covers discrimina- 
tions in all the various forms between persons and commodities. 
It shows the enormous advances in freight rates. It sets forth 
the abandonment by the railways of an enormous traffic to 
irresponsible private corporations, freight line, refrigerator car, 
and express companies, and the discrimination and oppression 
practiced by those corporations. 

When any man who cares for his country comes to realize 
the true significance of the control of commerce upon the 
development of all industry, the location of markets, the build- 
ing of cities, the density of population, the tremendous influ- 
ence upon the economic and social life of the people, with all 
its consequence to this generation and the generations to come, 
he will be shocked that it should all be left in the hands of the 
traffic managers of railroads. The control of commerce — its 
regulation, its rates, its distribution and destination — go to 
the upbuilding of the State, the nation. It must be controlled 
unselfishly, controlled with the highest patriotism, upon a 
broad, national policy. 

When this idea is once grasped, when it once possesses the 
American people, does the Senate believe, does anyone believe 
that they will permit the destiny of this nation to be controlled 
by a board of managers of consolidated railways? 

Sir, I say to the Senate here to-day that nothing, absolutely 
nothing, can prevent the ultimate government ownership of the 
railroads of this country except a strict government control 
of the railroads of the country. [Manifestations of applause 
in the galleries.] 

The VICE-PRESIDENT. The Senator from Wisconsin will 
suspend while the Chair warns the occupants of the galleries 
against further violation of the rules of the Senate, which for- 
bid applause or demonstrations in the galleries. The Senator 
from Wisconsin will proceed. 

Mr. LA FOLLETTE. I next invite attention to the argu- 
ments and misstatements which have been made in this debate 
with respect to the regulation of railroads abroad. 

6922 



56 

FOREIGN RESULTS MISSTATED. 

For the purpose of limiting the scope of legislation and the 
powers to he conferred upon the Commission, faults and fail- 
ures in government regulation abroad have been alleged in the 
course of this debate. The argument is scarcely a legitimate 
one. unless all of the conditions are known and presented, so 
that just comparison may be instituted. However, since it has 
been made so prominent a feature of the discussion by the Sen- 
ator from Massachusetts [Mr. Lodge], it demands consideration. 
I regret. Mr. President, that I am not honored with the pres- 
ence of the Senator from Massachusetts [Mr. Lodge]. 

Much the same arguments to the same effect were used with 
reference to several foreign countries. All were offered as ex- 
amples of the dire effects of government regulation which is 
strong enough to regulate. It will be entirely fair, therefore, 
to test his conclusion by examination of any one of the typical 
countries cited by him to sustain his contention. 

As an example, the Prussian system may well be considered. 
In Prussia governmental regulation of railways has gone to 
the extreme of government ownership and operation. It is 
contended by those opposed to effective government regulation 
that all the evils resulting from government interference are 
found intensified in the German system. Another reason why 
these representations of the Prussian system may very properly 
be made the test of all the foreign comparisons introduced into 
this discussion is the availability in the case of Prussia of 
abundant reliable information showing the actual conditions 
existing. 

The chief criticisms preferred against the Prussian, as well as 
other foreign systems, are : First, that the administration of 
the railways and the making of rates are perverted to serve 
the political ends of the officials having charge ; second, that 
the rates are adjusted on an inflexible, arbitrary basis, which 
is prohibitive for important commodities and long distances ; 
third, that the system does not subserve the general interest 
and the needs of commerce. 

The assertion that under the Prussian system the rate-mak- 
ing powers of the Government are exercised in subservience 
to political ends and not honestly in the public interest may be 
dismissed with the briefest consideration. It is probably suf- 
ficient to say that no satisfactory evidence warranting such 
a conclusion has been thus far offered. It is manifestly im- 
proper for u«, strangers to all the facts and conditions, to here 
pass judgment condemning the acts and motives of public offi- 
cials highly esteemed in their own country. 

I stop a moment, Mr. President, to read a few lines from a 
contribution made to the Journal of Political Economics in 
February, 190G, by B. H. Meyer. B. H. Meyer was a professor 
in the Wisconsin University. He was at the head of the trans- 
portation department of the department of economics of that 
university. He had been offered, Mr. President, I may say. at 
a very much higher salary, a like position in two different lead- 
ing universities of the East. He declined these offers because- 
of his devotion to the State in which he was born. He had 
been offered the editorship of one of the leading railway publi- 
cations of the country at a salary amounting to three times 
that which he received from the University of Wisconsin. He- 
6922 



57 

declined it. He consented to accept, at my hands, an appoint- 
ment upon the railway commission of Wisconsin, established 
under the law of 1905, because he saw an opportunity to serve 
in a public way the State which had given him birth, which had 
educated him, and which had helped to make him one of the 
foremost authorities upon the transportation problem in the 
world to-day. 

And let me say, Mr. President, that Professor Meyer returned 
to take his position upon the Wisconsin railway commission 
from a trip abroad, in which he made a study of this great 
question in foreign countries. 

With respect to the political phase of railroad regulation in 
Prussia, I wish to read from Professor Meyer the following. 
Speaking of the conflict of politics in railway regulation in this 
country as compared and contrasted with the conflict of politics 
in Prussian regulation under government ownership, he says : 

In the invidious American sense of the word, the Prussian railways 
are most emphatically not in politics. There are no paid lobbyists, 
no subsidized newspapers, no partisan publication bureaus, no " rake 
offs." I have been able to discover only one instance of dishonesty 
and faithlessness, and that was a case of a subordinate employee 
who had appropriated railway scrap to his own uses. The case was 
tried only a few months ago. The man was sentenced to the peni- 
tentiary for a term of five years. 

Who' will venture to say what would happen if the books of the 
American railway companies were to be subjected to the tests of the 
Prussian, with the same consequences in the courts? In all the testi- 
mony taken before the Senate Committee on Interstate Commerce I do 
not remember having seen a single statement something like this : 

Question. "Mr. , does your road discriminate?" 

Answer. " No, sir." 

Question. "Mr. , do you pay rebates?" 

Answer. " No. And I wish to say to you, Senators, that if you de- 
sire to convince yourselves of the truth of my statements, I cordially 
invite you to appoint expert accountants to investigate the books of my 
company." 

There is quite a difference apparently, Mr. President, between 
the conditions existing with respect to political bias in Prussia 
and in this country. 

The statement that the basis of railway rates established 
under government administration in Prussia is arbitrary and 
inflexible and not adjusted to meet the legitimate require- 
ments of commerce is not borne out by an examination of the 
facts. The Senator from Massachusetts [Mr. Lodge], in 
describing the Prussian rate system, dismisses some sixty 
special and commodity tariffs with little more than the passing 
statement that " government rate making in Prussia has re- 
sulted in giving discriminations to this traffic." If by discrim- 
ination we mean the unequal treatment of different commodi- 
ties and places, basing this inequality upon a careful study 
and analysis of the concrete economic conditions under which 
the traffic is conducted, it is true that more than 80 per cent of 
the Prussian traffic is carried at discriminating rates. But 
this is not the sense in which " discrimination " is used in de- 
scribing American abuses in railway management. If the Ger- 
man use of " discrimination " is made the test, every rate and 
every classification which departs from a yardstick rule of 
making classification and rates is a discrimination. 

It is interesting to note in passing that the opponents of 
government regulation of rates have based many of their argu- 
ments on the contention that under such regulation these dis- 
criminations would be impossible. 
6922 



58 

The following is a summary of the special and commodity 
tariffs In force on the Prussian state railways and the per cent 
of the total traffic which in 1902 moved under the tariffs in each 
class, respectively : 

Per cent. 

Special tariffs 1, 2, and 3 24.3 

Commodity tariffs, 5 to 10 tons . 5 

Commodity tariffs, 10 tons and over 64. 2 

The remainder of the traffic is handled under the general- 
class tariffs. 

The development of the commodity tariffs is shown by the 
fact that the traffic moved under them increased from 45.5 per 
cent in 1S90-91 to G4.2 per cent in 1902. 

This goes to show that the system is not inflexible, but that 
it develops with the needs of the country's commerce. 

Among the important commodity tariffs is the raw-materials 
tariff, which embraces, among other things, timber, stone, pot- 
ash, bituminous coal, coke, briquettes. 

You see how the Government in Prussia considers everything 
pertaining to the development of particular sections of the 
country that have it within them industrially to build up 
specific industries. While the rates under those commodity 
tariffs vary with the distance, as they undeniably should, 
the rate is not simply a mileage rate. The scale varies for 
different commodities ; for the same commodities for different 
distances and in different sections and in different direc- 
tions. Among the many commodity tariffs made up in like 
manner are the following : Wood, iron pyrites, zinc ore, chicory 
root, potash, stone, salt, artificial manures (4 tariffs), road- 
building materials, stones (10 tariffs), coal, coke, briquettes, 
and coal ashes (5 tariffs), iron ore and iron-ore slags — which 
are used for agricultural manures — (3 tariffs), slate, alcohol (6 
tariffs), grain and mill products (2 tariffs), slate, alcohol, kero- 
sene, petroleum, and naphtha. There are also distinct scales 
for export shipments of grain, potatoes, starch, fabrics, iron and 
steel articles, glass goods, iron, vitriol, etc., as well as import 
tariffs on cotton and similar raw materials. Besides those 
special tariffs as above, there are special scales in the tariffs 
for commerce into the German Levant and East Africa. 

Under the policy of the Prussian railway ministry in respect 
to tariffs on raw materials and other commodities of importance 
in industrial development and general welfare of the country, 
this traffic has been developed with signal success. The fol- 
lowing figures, taken from the official publications, show the 
enormous increase in the railway traffic in a number of such 
commodities from 1885 to 1903: 

Per cent. 

Iron ore 189 

Bituminous coal, coke 117 

Iron articles 241 

Mine timber, lintels 145 

Lignite 184 

Cut timber 126 

Rough stone, brick 247 

Paper and pulp board 289 

Burnt lime 224 

Artificial manures 405 

Mill and milling fabrics 190 

Refined sugar 173 

Cement 418 

Potatoes 194 

GDI'-' 



59 

Per cent. 

Beets (sugar) 168 

Pottery 137 

Pig iron 178 

Glass, glassware 193 

Cellulose and celluloid 224 

These figures show how they have built up great industries 
and developed special lines of traffic under strict government 
regulation in Prussia. 

It is to the further credit of the Prussian management that 
those increases in traffic were brought about with constantly 
decreasing charges and constantly increasing revenues to the 
state, and without any of that harrowing economic labor such 
as has been represented by some investigators of this subject. 

It becomes of interest to consider the manner in which such 
adjustments and reductions are brought about under the Prus- 
sian system. Bear in mind, in the meantime, the familiar 
forces and inducements which, in this country, secure from the 
railways special concessions, commodity rates, and rebates, in 
the interests of big and influential shippers, and tariff conces- 
sions to favored localities. 

It has been stated by the Senator from Massachusetts [Mr. 
Lodge] of the Prussian commodity rates that — 

These reductions can not be governed by economic reasons, but are 
in the main brought about by the pressure of political and industrial 
interests, and there must be, and indeed there is, a constant struggle 
between these interests to secure for each its share of the favors of 
low rates. 

When it is asserted that " these reductions can not be gov- 
erned by economic reasons," I beg to ask upon what other 
reasons do they rest? The proceedings of the various bodies 
which have to do with the making of such rates show that it is 
exactly the economic reasons which govern these changes. 
Other reasons may occasionally enter, but if there is one factor 
which above all others determines these reductions, it is the 
economic factor. Various economic forces struggle for control 
there as they do here. In the United States this struggle is fre- 
quently a one-sided one. When parties are unequal in strength, 
the railroad invariably decides in favor of the stronger party, 
irrespective of the justice in the controversy. In Germany, the 
Government, on the basis of wise and carefully formulated 
legislation, decides the' rules under which this struggle shall 
take place. 

Practically all reductions represented in the Prussian special 
and commodity tariffs are the result of a well-established, sys- 
tematic procedure, in which all interests are fairly and fully 
and publicly heard. This system, after being tried in Prussia, 
has come to be adopted in most continental states. 

Mr. President, I stop a moment to ask the attention of the 
Senate again to what Professor Meyer, to whom I am under 
special obligations with respect to this phase of the discussion, 
says, as a result of his investigation. The character of the 
investigations of complaints, the openness and publicity on 
all contested matters before government officials in Prussia, is 
in striking contrast to the methods employed by the railway 
officials controlling transportation in America. Professor Meyer 
states that there are conflicts there between different industrial 
centers and interests as there are here. He says : 

Such a conflict of interests exists in Prussia. It exists also in the 
United States. In Prussia all these conflicts take place in the full 
6922 



CO 

light of publicity. The proceedings of councils and committees and 
the legislature reveal every phase of every railway rate question which 
is brought forward. 

In Prussia every interest, no matter how small, has an opportunity 
of being heard publicly on every railway question which affects it, 
and the decision is made public ami known to all. In the United 
States only the strong and importunate ones are sure of consideration. 
There are no public deliberations. There is no public decision. Little 
or nothing may become known to those who would profit by such 
knowledge. 

The Prussian state railways are divided for administrative 
purposes into 21 groups or managements. In the territory 
of each of these managements there are public, semiofficial 
boards, in which the chambers of commerce, the chiefs of the 
various mercantile corporations and unions of manufacturers 
or producers, and the unions or lodges of agricultural, forest, 
and other extractive industries have their representatives. 
These boards, constituted as indicated, cooperate with the 
local railway managements in each district in determining the 
needs of commerce. They meet at stated periods, and on motion 
of the persons in interest may be called together at any time as 
need arises. Their deliberations pass ultimately to the central 
railway council for the state. In this way changes and ad- 
justments are brought about in a public manner, all interests 
being heard fully, and reforms are worked out in such a manner 
as not to injure the general interest of the state and to give 
each interest represented in the various districts its proper 
weight and the rates and classifications called for by its eco- 
nomic needs. One of the results of this deliberate method of 
arriving at and determining changes in rates and regulations 
is that the rates so established are never afterwards raised, and 
stability, which is so important a factor in business relations, is 
thereby secured. 

As going to show the high esteem in which the German 
method of rate adjustment is held by impartial and well-in- 
formed authorities, T quote the following from the London 
Statist : 

The German Government, true to its tendency, is never weary of ac- 
celerating their progress by assisting trade in every way possible. In 
Prussia, for example, the railways are all state property, and they are 
worked, not to bring in the most revenue possible but to promote trade 
to the utmost. 

Moreover, traders are encouranged and assisted in forming all kinds 
of societies calculated to promote their interests, and the Government 
continually consults representatives of the different trades. Over and 
above this, the Government is always ready to use its great influence, 
not only to open up new markets but likewise to acquire markets for 
its traders. 

Recently there have been two authoritative studies of our 
railway system by representatives of the German Government. 
In reporting one of these, Mr. G. Franke (Archiv fur Eisen- 
bahnwesen) makes a most instructive comparison of American 
and German methods of rate adjustment from the German 
standpoint. 

Mr, Franke is a Prussian governmental official of long experi- 
ence, having had charge in the technical affairs of railway ad- 
ministration. 

I shall quote a few paragraphs from Mr. Franke's report, 
because, as I remember it, the Senator from Massachusetts 
particularly arraigned the Prussian system as having demon- 
strated that a large government control is a most harmful thing 
692U 



61 

for the industrial development of the country. Mr. Franke 
came to this country and made a study of our institutions, of 
our commercial and industrial development, of our railroad 
systems, and he contrasted them with those of Prussia. He 
says, in part' 

We Germans nowadays especially arrange all our tariffs and make 
changes in them exclusively to further general economic needs of all 
the people by reductions. In a very subsidiary degree we give effect 
to considerations of revenue. 

Of course where you leave it to the railroads the first consid- 
eration is revenue — dividends, surplus. 

* * * Per contra, in American considerations of getting the utmost 
for the railways is the fundamental basis of rate making. * * * 
Rates are never made to serve the general interest of all the people. 
They obtain consideration only indirectly or covertly in so far as it an- 
swers the purpose of filling the strong box of the railway*, as, for exam- 
ple, in cases where a railway makes a rate to hold tonnage or to help some 
city or a certain market or is forced to meet competition of certain 
products in the world's markets. 

In respect to the interests of shippers he says : 

This one-sided view of regarding the railways as private enterprises 
can not permit the shippers to have as a right a voice in the determi- 
nation of rates as is the case in Germany. In the case of mammoth 
industries this is provided for by the community of interest of the great 
financiers. Except for this identity of control there is no regard paid 
to the interests of the shippers at large. In consequence thereof there 
is continually a bitter conflict of interests going on between the tariff 
policy of the railways and the needs of commerce, industry, and agri- 
culture. The general impression received from interviews with ship- 
pers, a study of the pleadings and decisions of the Interstate Com- 
merce Commission, and reading the testimony and reports of the Con- 
gressional committees lead one to the conclusion that the great indus- 
trial combinations are of course well satisfied with the railway rate, but 
that the great mass of shippers whose livelihood is dependent on the 
proper adjustment of a railway rate are utterly dissatisfied and often 
greatly embittered at their position. From this conclusion it will be 
seen that it is unfair, as is sometimes done in Germany, to take a few 
rates for iron ore, coal, or some other crude materials of the great 
industrial combinations and place in contrast thereto our rates and to 
draw conclusions from these paper rates, qxiite apart from the fact 
that a great number of them have no real significance because of the 
union of the railway and industrial interests in a common purse. 

As, for instance, the Chesapeake and Ohio Railway Company 
in coal as reported in an important decision handed down by the 
Supreme Court only a few days ago. 

The greed for profits and the disregard of public interest 
which characterize American railway management is well re- 
flected in the lack of proper provision for the safety of passen- 
gers and employees. The chief cause of this condition of affairs 
is the greed of American railways for profits, which keeps them 
from employing enough men to properly discharge their duties 
and the utter insufficiency, as compared with the German 
standard, of the number of persons employed to guard against 
accidents. 

This is indeed a serious arraignment of our let-alone policy 
in contrast with absolute government control. I follow it up 
with some very important and significant facts. 

The latest German report on our railways, just published a 
few weeks ago by Hoff & Schwabach — the Librarian of Con- 
gress was kind enough at my request to cable for some copies 
of the work, which arrived several days ago and may be con- 
sulted by those interested in pursuing this investigation. 

In this report by Hoff & Schwabach, it is computed that 
if the American railways were as carefully guarded as the 
6922 



62 

German we would have employed for that purpose 636,000 
men. whereas we actually have less than 50.000. or less than 
8 per cent of that number. It is further pointed out that 
our railways employ relatively fewer men in the maintenance 
of way and structures. These conditions, taken in connection 
with the lack of safety devices and our exposed and unguarded 
grade crossings, result in many unnecessary accidents. It is 
computed in this report that, relatively, the railways of the 
United States kill six and one-half times as many and injure 
twenty-nine times as many passengers as the Prussian railways, 
while the proportionate number of employees killed is more than 
three times, and the injured twenty-five times as great on the 
railways in the United States as in Prussia. 

Both of these German reports point out that all rate compari- 
sons between the two countries on the ton-mile basis are entirely 
misleading. The Hoff & Schwabach report says in this connec- 
tion : 

The conditions in America are fundamentally different from ours 
and make unrestricted comparisons regarding the level of rates im- 
possible. 

When due allowances are made for differences arising from 
capitalization, mail and express service, companies' freight, etc., 
it is the conclusion of the authors that the Prussian passenger 
rates are less than one-half of the rates on our roads, and the 
freight rate* are also considerably lower. 

The Senator from South Carolina [Mr. Tillman] directed 
the attention of the Senate and the country to that fact on the 
very day the Senator from Massachusetts [Mr. Lodge] con- 
cluded his address. The Senator from South Carolina, who is 
in charge of this bill, and who is alert in the public interest, 
rose promptly and presented a newspaper dispatch which re- 
ferred to the contents of this volume, and noted the fact that 
when the necessary corrections are made to secure a legitimate 
basis for comparison of rates between America and Prussia 
they enjoy the lower rates and fares. 

Professor Meyer, of the Wisconsin railway commission, to 
whom I have before alluded, who has made a very careful 
study of transportation matters here and abroad and is an 
authority on this subject, says of these comparisons that " no 
such careful comparisons have ever before been made." 

The report expresses astonishment at some of the peculiar 
and mistaken views current here regarding German railways. 
One of these mentioned was the idea expressed to them by an 
American railway dfficial that German railways are controlled 
in matters of policy and rates by political considerations. 

This American railway official seems to entertain the same 
views respecting this subject as the Senator from Massachu- 
setts. 

After diligent and unprejudiced study of American conditions 
these German investigators say : 

The descriptions in the preceding chapters will hear testimony to the 
fact that we earnestly endeavored to acquaint ourselves with the con- 
ditions of the railways in the United States without prejudice. With 
full recognition of the arrangements and services of the railways in 
the United States, their great work in the development of the country, 
we found nothing surprisingly grand or overwhelming ; there may he 
found there as everywhere in the cultured world for the observing 
well-informed traveler, that which is better and that which is less good 
than what we have. 
6922 



63 

In Mr. Franke's article is made a detailed study of the many 
factors and conditions which invalidate comparisons of rates 
on the ton-mile basis as a criterion of the relative reasonable- 
ness of transportation charges in the two countries. Insomuch 
as it has been sought by such comparison to make it appear that 
our rates are reasonable it may be well to enumerate briefly 
some of these differences as given by Mr. Franke. He says : 

It is well K> state at the outset that it is impossible to arrive at re- 
liable average freight rates for German and American railways. This is 
due to the difference of the fundamental basis on which the rates are 
established. All the more 50 as in the United States, the rates vary ex- 
traordinarily for the various species of freights, depending on th« kind 
of traffic, whether local or through traffic, and still more dependent 
on the character of the railway. For this reason typical freights re- 
duced to units of haul can not be established for separate classes of 
freight. 

Among the reasons given by Mr. Franke why the " statistical 
average income per ton per mile is not adapted for bases of 
comparison " are the following : 

(a) The .average ton-mile rate on American railways is un- 
duly depressed by the large proportion of transportation wasted 
by circuitous routing. The final report of the Industrial Com- 
mission gives examples of such circuitous routing by which 60 
per cent — formerly as high as 250 per cent — of the transporta- 
tion necessary is wasted. 

(b) In the traffic statistics of the United States, companies' 
freight is included. This increases the tonnage without cor- 
respondingly increasing the revenues. This is not done in the 
German reports. 

(c) The German statistics embrace large revenues from a 
comparatively small tonnage of high rate freight which is 
handled by the railroads there, but in this country is handled by 
express, fast freight, and private car lines companies, and the 
earnings of which is not included in the reported railroad rev- 
enues. 

(d) The average length of haul for freight traffic in Germany 
on all Government roads regarded as a system is 78 miles (125 
kilometers). In the United States, on all railways regarded as 
a system, the length of haul is about three times as great or 
(1901) 252 miles. It is a well-understood principle that the 
average rate per mile decreases with the length of the haul. 

(e) The statistical average on American roads does not rep- 
resent the average of what the people have to pay, hut a " lower 
rate than the public ever get''' It is the average of the high 
rates charged the general public and the special rates to favored 
shippers after the rebates are deducted. The German average 
represents the rates that all the people pay. 

In addition to the foregoing enumerated factors there are 
many other considerations that invalidate comparisons of rates 
per ton per mile and which are not taken into account in the 
railroad arguments. Foremost of which is the fundamental 
difference in the character of the traffic handled by railways 
here and in Europe. The proportion of ton-miles of cheap, 
bulky, heavy traffic, such commodities as soft coal and iron 
ore, carried by our roads is much greater, relatively, than 
abroad. While the quantity of this class of traffic has been 
greatly increased on the Prussian railways owing to the policy 
of low rates to the points having no water transportation, 
the proportion of such traffic is very much less than in this 

0922 



64 

country, where coal alone constitutes about one-third of the 
total tonnage. In the countries of Continental Europe, where 
for centuries have been maintained extensive systems of river 
improvements and canals, the bulk of such traffic is carried by 
water because that is the cheapest known transportation. The 
omission of this great volume of the low-grade traffic from rail- 
road tonnage of Germany obviously invalidates the average 
gross revenue per ton per mile as a basis of comparison of 
rates of the two countries. 

The Senator from Massachusetts makes repeated reference 
to the fact that a large volume of the freight traffic of con- 
tinental countries is carried by waterways. He refers to this 
fact as evidence of the failure in Government management or 
control of the railways. He says the commerce of these 
countries is driven to the waterways. The fact is that the 
waterways carried the freight traffic of these countries for 
centuries before the advent of railways. It would be just as 
pertinent to suggest that the inefficiency of the railways of this 
country or their mismanagement had driven commerce to the 
Great Lakes. 

It would be a peculiar economic policy, indeed, which would 
seek to supplant in either country these magnificent waterways 
as carriers of heavy traffic with railroad transportation at 
far greater cost to the community. Especially so in Europe, 
where those waterways are the work of centuries and repre- 
sent untold expenditures. The development of this class of 
traffic by the railways of Prussia has been mainly in an effort 
to supplement the water transportation, particularly to points 
not well supplied in this respect. When it is remembered that 
the waterways are maintained for the use of commerce, it 
must be conceded that the dissemination of industry and the 
development of this commerce at interior points is greatly to 
the credit of Prussian railway management, in so far as it has 
been done at all. I have already shown how greatly this char- 
acter of traffic has been developed by the Prussian railways. 

While the Senator from Massachusetts recognizes that in all 
European countries a vast part of the bulky traffic is carried 
by waterways, he makes no allowance for this fact in his state- 
ments of average railroad freight rates. The figures which 
he offers for the foreign countries in comparison with ours rep- 
resent entirely different traffic and entirely different services. 
To use the English statistics of railways, for instance, which 
the Senator himself says are not to any considerable extent re- 
liable, in comparison with our statistics is only to draw unwar- 
ranted conclusions. The authority which he quoted, Mr. Ack- 
worth, in a contribution to the Journal of the Royal Statistical 
Society a few years ago, affirmed that comparative statistics in 
which English statistics of railways are a basis of comparison 
are practically worthless. Here, too, the Senator omits all con- 
sideration of the vast differences in the character of the serv- 
ice in the two countries, the much shorter haul in England; 
that the English freight rate includes cartage and storage, and, 
finally, he ignores entirely the effect of the peculiar geographical 
situation of England. It has an area of only about 50,000 square 
miles, or less than the area of North Carolina, nearly completely 
surrounded by sea, so that, according to parliamentary testi- 
mony, perhaps three-fifths of all the shipping points within Eng- 
6922 



65 

land are subject to influence of water transportation which 
naturally appropriates a large portion of the cheap, heavy 
traffic. Fundamental differences of this kind are ignored by 
the Senator throughout his argument and his comparisons with 
foreign countries. 

Surely, in the face of all these fundamental differences in the 
traffic conditions, all of which tend to show that the comparisons 
are wrong and to discredit the conclusions sought to be deduced 
therefrom, no one will contend that such arguments prove that 
government regulation is a failure in Germany, nor elsewhere, 
where the arguments are based on like disregard of funda- 
mental conditions. 

With our widely different institutions, our complex system of 
State and National Government, our marvelously rapid growth 
and development, the intense struggle for wealth and industrial 
centralization which has recently taken place in this country, 
the control of transportation in the United States is distinc- 
tively an American problem. 

Investigation into foreign systems of management may offer 
comparisons of value, but it will not afford a basis for solution 
of the questions confronting us. 

There is one very important lesson to be learned from the 
most casual review of the European countries. The line of 
difference as to policy is between government ownership and 
the strictest government control. None of the progressive coun- 
tries of Europe adopts the let-alone policy. No authority on the 
subject contends that the public interest should be left at the 
mercy of the selfish control of private corporations. In view 
of the protection afforded by foreign countries to the people 
from the monopoly of transportation, the mild, inadequate power 
conferred on the Commission by this bill seems hardly to the 
credit of our boasted free institutions. In view of our in- 
dustrial condition, that this legislation should fail to express the 
full power of our Government, of our Congress, as the measure 
of relief, is the best evidence that the public good is not the 
governing consideration, and is outweighed by the very in- 
fluences with which the Government should cope. 

I do not believe government ownership either the necessary or 
the best solution of the transportation problem as it exists in the 
United States to-day. But, as I trust I have made clear, for 
my whole argument is based on that premise, I believe that 
the Government of the United States is bound to exercise all 
the power of a sovereign nation to the end that the regulation 
and control of its commerce shall be just and equitable, not 
only to shippers, but to the whole public. It is bound to see 
to it that the country is not handed over to monopoly and to 
selfish interests. 

VALUATION OF RAILWAY PROPERTY NECESSARY AS A BASIS FOR ESTAB- 
LISHING REASONABLE RATES. 

Mr. President, I now ask the Senate to consider more fully a 
recommendation of the Commission, to which I made brief 
reference yesterday. 

This recommendation lies at the very foundation of any sys- 
tem of government regulation, which is to secure just and rea- 
sonable rates. Unless this recommendation be adopted, and 
the bill amended in conformity with it, the Senate and the 
country might as well understand that the railroads are to be 
permitted to continue to advance rates without let or hindrance. 

6922 5 



Mr. DOLLIVER. Mr. President 

The VICE-PRESIDENT. Does the Senator from Wisconsin 
yield to the Senator from Iowa? 

Mr. LA FOLLETTE. I do, sir. 

Mr. DOLLIVER. I call the attention of the Senator to the 
fact that it is one of the purposes of section 15 of the pending 
bill to deal with rates that are unreasonably high. 

Mr. LA FOLLETTE. Yes. 

Mr. DOLLIVER. I know of no reason why the Interstate 
Commerce Commission may not consider whether a rate com- 
plained of is excessive, and deal with it on that basis. 

I further desire to call the Senator's attention to the fact that 
the Committee on Interstate Commerce requested the Interstate 
Commerce Commission to send here a bill representing their 
matured convictions of what legislation ought to be had at this 
time, and that in the bill which they sent here the provisions 
for the valuation of all the railroads of the country did not ap- 
pear, a circumstance which led me at least to think that the 
Commission, dealing with rates complained of as unreasonably 
high, if given the authority to reduce them would without 
further legislation be able to take into account the very ques- 
tion to which my friend refers. 

Mr. LA FOLLETTE. I am aware, as I suggested yesterday, 
Mr. President, that the Commission submitted a bill to the 
committees of Congress, as stated by the Senator from Iowa ; 
but when you lay that bill side by side with tke recommenda- 
tions which they submitted in 1897, which they reaffirmed in 
1898, which they declared imperative in 1899, which they said 
were necessary to the protection of commerce in 1900, which 
they said were essential in 1901, and 1902, and 1903, and 1904, 
and 1905 — when anyone compares that bill with all of those 
recommendations it can only mean that, unable to get what is 
necessary to a regulation of commerce, they are finally con- 
strained to ask for what they think they can get. 

Mr. President, I said yesterday that gentlemen who have 
been here for years supporting the recommendations of the 
Commission have not hesitated to say that they accept this 
bill because it is the best they can get; that they hope it is 
the entering wedge, and that it would ultimately lead on to 
legislation which would meet the demands of the country. I 
am not permitted to report what has been said to me by others, 
but I may properly say this : That it is a fair inference, from a 
comparison of the reports of the Interstate Commerce Com- 
mission with the bill which they submitted to the committees 
of this Congress, that the bill so submitted goes only as far as 
the Commission thought the committees and Congress would 
permit the legislation to go at present. They were appar- 
ently not far wrong, because the bill, as they originally sub- 
mitted it, was pretty badly trimmed up before it got out of 
the House Committee on Interstate Commerce. 

Mr. DOLLIVER. Now, Mr. President 

The VICE-PRESIDENT. Does the Senator from Wisconsin 
yield to the Senator from Iowa? 

Mr. LA FOLLETTE. I do, sir. 

Mr. DOLLIVER. Without undertaking to debate with the 
Senator from Wisconsin, I feel considerable interest in this 
6922 



67 

bill, and I confess that I approached the subject in the present 
Congress from the standpoint of one who desired to have some- 
thing done rather than from the standpoint of representing all 
my own views and opinions in respect to these propositions. 

Mr. LA FOLLETTE. Well, Mr. President, when having 
" something done " means turning back the clock twenty years, 
when you reflect that in the last ten or fifteen years the indus- 
trial life of the people of the United States has been wholly 
changed, producer and consumer are oppressed, that the door 
of opportunity stands open no longer to individual enterprise, 
I say that legislation which only goes as far as the legislation 
of 1887 was understood to go (except as it embraces the private 
car companies and grants larger power with respect to pub- 
licity) is not " something" which the people of this country are 
entitled to have " done " at this time. I very much fear that 
simply getting a little " something done " is perhaps delaying 
for another ten years getting that which will liberate the in- 
dustries and commerce of this country. 

Now, Mr. President, I had started out to say, when inter- 
rupted, that the only restraint which will be interposed under 
the law, as proposed to be amended by this bill, will be that they 
will be required to keep the rates reasonably level. The rate 
line may be high, but it must be relatively just and equal. 

And I think I will make it clear to the Senate that, under the 
bill as it stands to-day, rates can not be brought to the reason- 
able rate level, but only to the equal rate level — that is, the 
railway may impose any burden it pleases, provided the burden 
be reasonably distributed, the rates relatively equal. 

There is a vast difference between reasonable rates and equal 
rates. 

Mr. DOLLIVER. Why does my friend from Wisconsin ig- 
nore the fact that the bill is also framed for the purpose of 
preventing excessive rates? 

Mr. LA FOLLETTE. Let me ask my good friend from Iowa 
to be patient with me a little. I know it takes me quite a good 
while to make my points clear; I am inclined to be discursive; 
I know that ; but if you will just hear me for a little while I 
believe I will make it plain to you that under this bill you can 
not get reasonable rates. 

• I know that there is a provision in it that says the Commis- 
sion shall, upon a complaint being made, ascertain whether the 
rates are just or reasonable, but I purpose to show the Senate 
that it does not do that, and I was proceeding to say that there 
is a vast difference between reasonable rates and equal rates. 

This bill is framed to enable the Commission to determine 
and enforce equal rates. It makes no provision for determining 
and enforcing reasonable rates. 

Mr. President, what are just and reasonable rates? The 
Supreme Court has defined just and reasonable rates to be such 
rates as afford " just compensation." The railroad is entitled to 
" just compensation ; " it is entitled to no more. 

It was held in Smythe v. Ames (169 U. S., 546) : 

The utmost that any corporation operating a public highway can 
rightfully demand at the hands of the legislature when exerting its 
general power is that it receives what, under all the circumstances, is 
such compensation for the use of its property as will be just both to it 
and to the public. 
6922 



68 

How shall this "just compensation" be ascertained? In the 
case of St. Louis and Santa Fe Railway Company v. Gill (156 
U. S., G49) the court said: 

The effect on the entire line of railroad is the correct test of the 
reasonableness of rates of fare which are attacked as taking of prop- 
erty without " just compensation " or due process of law. 

The Supreme Court gave us, in the case of Smythe v. Ames 
(supra) a very clear indication of the course to be pursued on 
the part of Government in determining reasonable rates. Mark 
the language : 

If a railroad corporation has bonded its property for an amount that 
exceeds its fair value, or if its capitalization is largely fictitious, it 
may not impose upon the public the burden of such increased rates as 
may be required for the purpose of realizing profits upon such exces- 
sive valuation or fictitious capitalization. 

If a corporation can not maintain such a highway and earn divi- 
dends for stockholders, it is a misfortune for it and them, which the 
Constitution does not require to be remedied by imposing unjust bur- 
dens upon the public. 

******* 

We hold that the basis of all calculations as to the reasonable- 
ness of rates to be charged by a corporation maintaining a highway 
under legislative sanction must be the fair value of the property being 
used by it for the convenience of the public. And, in order to ascer- 
tain the value, the original cost of construction, the amount expended 
in permanent improvements, the amount and market value of its bonds 
and stocks, the present as compared with the original cost of construc- 
tion, the probable earning capacity of the property under particular 
rates prescribed by statute, and the sum required to meet operating 
expenses are all matters for consideration, and are to be given such 
weight as may be just and right in each case. We do not say that 
there may not be other matters to be regarded in estimating the value 
of the property. 

The court does not attempt to fix the limits of the investiga- 
tion which must be made in each case. To deal justly between 
the railroads and the public the Commission will necessarily 
take into account every fact and circumstance which is entitled 
to consideration in fixing just and reasonable rates for the road 
under investigation. 

This, then, is the law which has been laid down by the Su- 
preme Court This is the test which will be applied whenever 
the Commission makes rates and the railroads resist their en- 
forcement. The corporation will deny that they are lawful 
rates ; that they are reasonable rates ; that they will afford 
them just compensation for the services rendered. The Com- 
mission must meet proof with proof. Otherwise the railroad 
company will overwhelm it in court and set aside the rates pre- 
scribed. Manifestly the Commission must be prepared to prove 
the fair value of the property of the railroad, its receipts from 
all sources, the sum required to meet operating expenses, and 
the probable earnings under the rates prescribed. 

The interstate-commerce law declares unreasonable rates un- 
lawful. The Supreme Court held that it provided no way to 
enforce the orders of the Commission. This bill makes provi- 
sion for enforcing the orders of the Commission with respect to 
reasonable rates, but it does not provide for ascertaining what 
are reasonable rates. 

It authorizes the Interstate Commerce Commission to make 

an investigation upon complaint that rates are unreasonable, 

but when the Commission shall have exhausted all its power 

under the law as proposed to be amended by this bill, it will 

6922 



69 

still be unable to determine whether the rates complained of are 
reasonable or unreasonable, except as compared with other 
existing rates, fixed by the railroads — the reasonableness of 
which are known only to the railroad company itself. Here 
the bill stops. It provides no specific method by which it is 
made the plain duty of the Commission to ascertain the rea- 
sonableness of rates based upon all the facts by which its deter- 
mination will be tested by the court. 

I contend, therefore, that preliminary to ascertaining the law- 
ful rate — that is, the reasonable rate — the Commission must, 
as a basis for its work, know the value of the property of the 
corporation in question, its cost of operation, and all of the 
facts necessary to enable it to form a just judgment with re- 
spect to what shall constitute a reasonable profit on the invest- 
ment. Without this the Commission can have no lawful i tand- 
ards with which to compare challenged rates. Without this the 
Commission is inevitably driven, in any case of complaint, to in- 
stitute comparisons with other rates fixed by the railroads, hav- 
ing no knowledge whatever with respect to the reasonableness of 
the rate so selected for comparison. Neither the interstate com- 
merce statute nor this proposed amendment makes any provision 
whatever under which the Commission is required to master 
the facts and secure the material for a foundation upon which 
to erect a standard of lawful or just and reasonable rates. If 
the statute is to provide no means of ascertaining the reason- 
able rate, then it were worse than folly to declare an unreason- 
able rate unlawful. No one will contend that the law of 1887, as 
amended by the acts of 1889 and 1891, confers specific authority 
upon the Commission and imposes upon it the duty to ascer- 
tain the value of railroad property in accordance with the rule 
laid down in Smythe v. Ames and other cases. 

Mr. DOLLIVER. Mr. President 

The VICE-PRESIDENT. Does the Senator from Wisconsin 
yield to the Senator from Iowa? 

Mr. LA FOLLETTE. I do. 

Mr. DOLLIVER. I must confess that my honored friend 
from Wisconsin, while he has relieved himself from the charge 
of being discursive, is very far from being conclusive. 

Mr. LA FOLLETTE. Well, I have not got through yet by a 
good deal. [Laughter.] 

Mr. DOLLIVER, The Senator paid, in the early part of his 
speech, a fine tribute to the Interstate Commerce Commission 
as to their exercise of the powers conferred upon them by the 
act of 1887, and has referred to several cases in which the In- 
terstate Commerce Commission has actually reduced rates be- 
cause they were unreasonable. Now, so far as my knowledge 
and investigations of this problem go, I do not see how much 
power the Interstate Commerce Commission would have to es- 
tablish a standard after they knew the value of the railroad 
property. 

Mr. LA FOLLETTE. I am going to try to make that clear 
before I get through. 

Mr. DOLLIVER. Because all parties agree that in dealing 
with individual rates we have no method of determining their 
relation to the cost of the railroads or the total earning of the 
railroads, certainly no method as to value; and I know of no 
reason, if you charge the Interstate Commerce Commission with 

6922 



70 

the business of finding out whether a rate is just and reasonable, 
why they may not go into all these questions just as fully as a 
court could go into them in passing upon them. 

Mr. BAILEY. Mr. President— 

The VICE-PRESIDENT. Does the Senator from Wisconsin 
yield to the Senator from Texas? 

Mr. LA FOLLETTE. I do. 

Mr. BAILEY. Mr. President, it seems to me that if the raft- 
road commission were first furnished with accurate and reliable 
information as to the value of the entire railroad, then, meas- 
uring all the rates by that, it would be very easy by compar- 
ison to determine the value of any particular service or any 
single rate. If it is not possible to determine the reasonable- 
ness of any particular rate or whether any particular rate 
affords a just compensation, then this bill might as well never 
have been written, because it authorizes the Commission to do 
that. If it authorizes and empowers the Commission to per- 
form an impossibility, it seems to me it needs correction along 
the line which the Senator from Wisconsin [Mr. La Follette] 
is now indicating. 

Mr. LA FOLLETTE. Mr. President, the Senator from Texas 
[Mr. Bailey] has anticipated much that I should have said in 
reply to the Senator from Iowa [Mr. DolliverJ. 1 think — 1 
venture to say so again — that before we get through with this 
proposition it will be made plain that the bill is defective 
in this particular. It is certain that the Commission — I had 
just said this when I was interrupted, and I will have to go 
back and take up the thread of my argument. 

Mr. BEVERIDGE. Mr. President 

The VICE-PRESIDENT. Does the Senator from Wisconsin 
yield to the Senator from Indiana? 

Mr. LA FOLLETTE. Yes ; I do. 

Mr. BEVERIDGE. Does the Senator propose an amendment 
to the bill to remedy this defect which he alleges is in the bill? 

Mr. LA FOLLETTE. I shall offer an amendment. I hope if 
any better amendment can be drawn, that some other Senator 
will offer one, but I shall offer an amendment to meet this 
particular fault in the bill and I hope such an amendment will 
be adopted. I believe the Senator from Iowa [Mr. Dolliveb] 
desires to see this bill a strong and effective measure. If it is 
made plain to him that such an amendment will add strength 
and efficiency to this bill, I am very certain he will give it his 
strong support. 

Mr. DOLLIVER. Mr. President, I certainly sympathize with 
the notion of the Senator from Wisconsin that the Interstate 
Commerce Commission in passing upon what rates are just and 
reasonable will be governed by the considerations, in part at 
least, to which he has referred. For myself I do not doubt 
that in determining such a question they would deal with it 
exactly along the line suggested by the decision of the Supreme 
Court to which the Senator has referred. 

Mr. LA FOLLETTE. Yes; Mr. President, but I think I 
shall be able to make it clear that they can not deal with it in 
that way without additional legislation. I shall prove to the 
Senate that the Commission appealed to Congress to give them 
the legislation under which they could make this valuation of 
6922 



71 

the railroads as necessary to a proper basis of rate making 
under the decisions. 

I have to resume the thread of my discourse. I had said 
that no one will contend that the law of 1887, as amended by 
the acts of 1889 and 1891, confers specific authority upon the 
Commission and imposes upon it the duty to ascertain the value 
of railroad property in accordance with the rule laid down in 
Smythe v. Ames and other cases. 

The law of 1887 and the amendments proposed by this bill 
will invest the Commission with power to require of the rail- 
roads a full report with respect to the valuation of their prop- 
erty. But, Mr. President, that is not sufficient. The Govern- 
ment must not be compelled to accept the railroad company's 
statement of the value of its property, and stop with that. In 
addition to the railroad company's valuation the Government 
must be authorized to make a thorough and complete valuation. 
There is at the present time no law under which the Govern- 
ment can do that work. 

It is certain, I say, that the Commission has never construed 
the law of 1887 as giving them authority to make a valuation 
of railroad property ; and I say furthermore that Congress has 
never so construed the law, because Congress has never yet 
made an appropriation which would enable the Commission to 
proceed to do that thing. It is equally certain that the pending 
bill contains no specific provision granting such authority and 
imposing such a duty upon the Commission. 

No one will argue that such an important duty should be left 
to doubtful construction or to be implied from other powers or 
obligations. 

The bill should be so amended as to make it the duty of the 
Commission to proceed with this work of valuation, and Con- 
gress should make the necessary appropriation to carry it for- 
ward promptly. It should not be left optional as to whether 
this work shall be done or when it shall be done. There must 
be no obscurity or uncertainty about it. The broadest power 
should be granted. The employment of engineers, accountants, 
experts, practical and experienced men in every department 
of railroad engineering, construction, operation, and accounting 
should be authorized. The appropriation of whatever sum is 
necessary to inaugurate and vigorously prosecute this under- 
taking should be made at this session, and if it be required, it 
should be made mandatory on the Commission to act at once. 

I shall offer an amendment to the pending bill, drawn with a 
view of giving the Commission full authority and imposing upon 
it the duty of ascertaining the value of the railway property of 
the United States, and reporting the progress upon the work at 
the beginning .of each regular session of Congress. If we are 
desirous of giving the public assurance that Congress has taken 
hold of this subject with sincerity of purpose, that an intelli- 
gent, economic basis is to be established for thoroughly and 
justly dealing with the great interests involved, we shall em- 
body such a provision in this law. 

In its report for 1903 the Commission recommends additional 
legislation to enable the actual value of railroad property to be 
ascertained. It says : 

Among the subjects which deserve the attention of Congress is the 
need of a trustworthy valuation of railway property. 
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72 

After devoting several pages to a presentation of the reasons 
which make it imperative to secure this information and th? 
necessity of additional legislation to this end the discussion 
closes with the following: 

A large number of questions incident to the valuation of railway 
properties suggest themselves in addition to those which have been 
mentioned. This report can not, however, enter into further detail. 
Sufficient has been said to indicate the importance of an authoritative 
determination of railway values. It is respectfully recommended that 
Congress take this matter under advisement with a view to such legis- 
lative action as may be deemed appropriate. 

Respecting the vital importance of ascertaining the reason- 
ableness of rates the Commission in the report of 1903 says : 

To determine what are just and reasonable rates for public carriage 
is a governmental function of the highest utility. This is the central 
idea of regulation and the special field of its usefulness. 

Oh, Mr. President, in the passing of a bill now to correct 
the errors of twenty years ago, surely we should not leave out 
the central idea of regulation. 

Respecting the vital importance of ascertaining the value of 
railway property as the first step in determining the reason- 
ableness of rates, the Commission says further, in the same 
report : 

No tribunal upon which the duty may be imposed, whether legisla- 
tive, administrative, or judicial, can pass a satisfactory judgment upon 
the reasonableness of railway rates without taking into account the 
value of railway property. 

The recent convention of State railway commissioners in this 
city favored the valuation of the railway property of the coun- 
try. The Washington Post of April 5 says : 

The resolution offered Tuesday by Commissioner B. H. Meyer, of 
Wisconsin, declaring it to be the sense of the association that the 
Congress of the United States should authorize and direct the Inter- 
state Comrrerce Commission or some other department of the Federal 
Government to ascertain the inventory value of all railways in the 
United States, and to -fix a valuation on the railway property of each 
State separately, was adopted unanimously. 

Now, I come to the point to which my friend from Iowa di- 
rected attention in one of his questions. 

I do not claim that the Commission will be able to determine 
with mathematical exactness the cost of the service in shipping 
a single article carried with a mass of other freight The 
traffic manager can not do that. But I contend that the Com- 
mission can ascertain the fair value of the property of the rail- 
roads ; the cost of the maintenance and operation ; the fair 
profit, interest, or return which it is entitled to receive, and the 
full amount which it does receive. I contend that upon this 
as a basis, giving due consideration to all other material circum- 
stances, the Commission can determine reasonable rates that 
will afford the carrier " just compensation " for the services per- 
formed, and that with this knowledge the Commission won Id 
be able to form a just judgment — I do not say a mathematically 
exact determination of the cost, but a just judgment — with re- 
spect to a reasonable rate for a single shipment. 

I contend that the Commission can in no other way determine 
a reasonable rate — a rate that is reasonable to the consumer, 
the man who pays the freight, that it can in no other way de- 
termine rates that are certain, if resisted by the railroad, to be 
sustained by the court. 
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73 

I go further. I contend that it is the only way in which a 
fair approximation to justice can possibly be approached. The 
Government must deal fairly by the railroad, the shipper, the 
producer, and the consumer. This can not be done by a " first- 
come-first-served," " catch-as-catch-can " method of attacking a 
rate here and a rate there, giving a benefit to this man, an ad- 
vantage to that community, while the railroad is free to recoup 
by advancing its rates on some other man or some other com- 
modity. Awarding a complainant a rate adjudged to be reason- 
able, because it more nearly agrees with a rate which the car- 
rier has established for some one else, is giving the complainant 
relative justice instead of real justice. 

Mr. President, what is to be the result of this " hit-and-miss " 
method when you come to apply it in practice? Place in the 
hands of the Commission the power to enforce its orders, but 
withhold from them the authority and the means to get the 
actual value of railroad property, and by so doing the just basis 
for real instead of apparently reasonable rates, and what is 
almost certain to follow? The railroads must realize that every 
relatively low rate will at once become the basis by comparison 
for a complaint to reduce any rate which it can be judged ought 
to be equally low. They will for self-protection speedily advance 
the relatively low rates, in order to take away the standards 
which would be seized upon as a cause for complaint and a 
basis for the judgment of the Commission in ordering a reduc- 
tion. 

Indeed, so far as the shipper is concerned, this would be 
quite as satisfactory as an order of the Commission lowering 
his rate to the level of his more-favored competitor. It is of no 
concern to the shipper that he secure an absolutely reasonable 
rate. All he cares for is a relatively reasonable rate. He wants 
a rate equal to his competitor. He is quite as well satisfied if 
this be secured through raising his competitor's rate, as by 
lowering his own rate to the level of the competitor. Once invest 
the Commission with power to equalize rates and the com- 
plaining shipper will not find it necessary to apply to the Com- 
mission for equal rates. He will complain to the railroad com- 
pany as less expensive and more expeditious. He will cite the 
fact that a competitor has an advantage in rates. The railroad, 
knowing that if the Commission is appealed to it may adjust the 
difference by lowering the higher rate, will promptly adjust it by 
advancing the rate of the competitor. What will the competitor 
do with this advanced rate? Excepting upon such articles as 
have a fixed and unvarying price in the trade, the competitor 
will simply add the increased freight charge to the price and 
pass it on to the jobber. The jobber will add it to the price to 
be paid by the retail merchant. The retail merchant will hand 
it over to the consumer as an added charge to his purchase. As 
the consumer can not pass it on, he must pay it himself. 

If this bill is to have far-reaching results — if it is to protect 
the consumer as well as the shipper — then the foundation must 
be laid for ascertaining the reasonable rate; that is, on the rate 
which in and of itself is reasonable. The system of government 
regulation which is to have a just regard for the consumer must 
not be based on the relatively reasonable rate. 

The ascertainment of the value of the railroads is the very 
corner stone of any great and enduring service which this legis- 
lation is to accomplish for the people of this country. 
6922 



74 

STATE VALUATIONS OF RAILROAD PROPERTY. 

It can not be said in answer to this demand for a valuation 
of railway property that such a valuation is impossible or 
impracticable. In three notable instances such valuations of 
railway property have been made by States. In these cases 
every item of material and labor entering into the cost of the 
roadways and rolling stock of the roads have been enumerated 
and appraised. These valuations cover every mile of road 
within the States of Michigan, Wisconsin, and Texas. Obvi- 
ously, a work that can be undertaken and accomplished by a 
State for all the lines within its boundaries can be accom- 
plished by the Federal Government for the whole country. 
Furthermore, any work that is undertaken along this line in 
the future will have a great advantage in the knowledge 
obtained from the previous experience of these several States. 

MICHIGAN AND WISCONSIN VALUATIONS. 

The valuations of Michigan and Wisconsin were made for the 
purpose of assessment of ad valorem taxes. In each case the 
determination of physical values and nonphysical values were 
made separately. In each case the State had the benefit, in 
arriving at its valuation, of the cooperation of the railway com- 
panies themselves. In the Wisconsin valuation the initial ap- 
praisement was made by the roads, the State merely making 
such valuations and determinations as were necessary to verify 
and correct the valuations as made by the companies. 

In the Wisconsin valuation the expense to the railroads was 
probably less than $11 per mile on the average. The Chicago 
and Northwestern Company spent an average of about $10.60 per 
mile on 1,784 miles of line. The average expense to the State 
for all lines did not exceed $7 per mile. It is safe, therefore, to 
predict that the total cost to both the Government and the roads 
of making such a valuation for the whole country, will not ex- 
ceed $20 per mile, or for the entire mileage of the country con- 
siderably less than a total of $5,000,000. This amount, taken in 
consideration with the magnitude of the public interests depend- 
ing on such valuation, is not a large sum. Its expenditure ought 
not to be in any degree a bar to the prosecution of so great and 
so necessary a public work. 

The results of these valuations are an indication of what 
would be the results of a like valuation of the railway property 
of the country. So far as I have been informed there has been 
no protest against these valuations on the part of the railroads, 
except to contend that the valuations were too high. In the 
case of the Wisconsin valuation the values placed on the prop- 
erty by the roads were, in nearly every instance, increased by 
the board of assessment, and in some cases considerably in- 
creased. 

I believe anyone who has ridden over the lines of Wisconsin 
or of Michigan will say that upon the average they are the 
equal of the lines of the country. I know that the two principal 
roads of Wisconsin, in the matter of curves and double track 
and ballast and equipment and everything that enters into rail- 
road values, are the equals of the great trunk lines of this 
country. 

The final determination of the average present value, per mile 
of line, by the States of Wisconsin and Michigan was as follows : 

MICHIGAN, 1900. 

7,813.27 miles, value per mile $21,396 

6922 



75 

WISCONSIN, 1903. 

6,656.88 miles, value per mile $25,501 

MICHIGAN AND WISCONSIN. 

14,470.15 miles, value per mile 23,231 

It is interesting to compare with the results of the Wisconsin 
valuation the average capitalized value per mile for a few of 
the leading companies. 

The average value as determined by the company for the 
Saint Paul lines in the State (1,691 miles) was $2G,340 per 
mile, and as finally fixed by the State, $30,004. The capitaliza- 
tion amounted at the same time to $33,321 per mile. 

The company's valuation of the Omaha lines (737 miles) was 
$26,639 per mile, and the State placed it finally at $27,464. At 
the same time the floating capitalization was equal to $44,649 on 
the entire line (1,521 miles). 

The aterage value of the Chicago and Northwestern road in 
Wisconsin (1,784 miles) as appraised by the railroad engineers 
was $25,382; as finally determined by the board of assessors, 
$29,063. The average capital per mile of this road for the year 
ending June 30, 1904 (which practically coincides with the time 
of the appraisement), was $32,180. 

The Wisconsin Central appraised its property, three-fourths 
(723 miles) of which is in Wisconsin, at an average of $19,930 
per mile. This valuation was increased by the State board to 
$22,111 per mile. The capitalization of this road per mile was 
$58,215, or about three times as much as its own valuation and 
over 250 per cent of its value, as determined by the State board. 

To the appraised values of the railway property, there were 
added for taxation certain amounts to cover franchises, and the 
value of the property as an organized, going concern. But these 
additions would not properly be considered in determining a 
valuation for fixing rates. 

Mr. NEWLANDS. Mr. President 

The VICE-PRESIDENT. Does the Senator from Wisconsin 
yield to the Senator from Nevada? 

Mr. LA FOLLETTE. Certainly. 

Mr. NEWLANDS. I wish to ask whether the valuation was 
made for taxation or for the purpose of regulating rates. 

Mr. LA FOLLETTE. It was made for taxation. I shall 
later call attention to the basis of the capitalization per mile 
upon which the railroads have assessed rates to the people of 
Wisconsin for the last twenty-eight or twenty-nine years. 

Mr. NEWLANDS. I wish to ask the Senator whether he 
contends that the franchise should be valued as a part of the 
property of the corporation for purposes of taxation and should 
not be considered in the determination of rates. Did I under- 
stand him so to contend? 

Mr. LA FOLLETTE. As I shall presently show, there is 
a broad distinction upon economic principle to be made between 
the valuation of property for taxation and the valuation of the 
property of a public carrier for fixing rates. 

Mr. NEWLANDS. And that one might include the value of 
the franchise and the other not? 

Mr. LA FOLLETTE. Yes, sir. Of course I will say in reply 
that it might be contended by a corporation that they ought to 
be allowed something for the franchise where they have "paid 
something to get it." 
6922 



76 

I recall one notable instance, the case of a street car company 
in Philadelphia, I believe, where the common council was about 
to vote the franchise to the street car company " for nothing." 
A protest went up from the citizens, and finally Mr. Wana- 
tnaker, I believe, wrote out his check for two and a half million 
dollars and sent it to the common council, saying, " Do not give 
this franchise away to the corporation. It is worth a good 
deal to the public. Make the corporation pay for it. I am not a 
railroad man and am not in the street-car business, but as an 
earnest of my belief that public franchises are worth something 
and ought to be paid for when they are secured by public- 
service corporations I tender my check for two and a half mil- 
lion dollars," I think it was. " Give me the franchise. I can 
turn it over to some corporation and make a good commercial 
transaction out of it." 

I believe history records that the common council sent him 
back his check ; did not sell him the franchise, but voted it to 
the public-service corporation " for nothing," at least, so far as 
is known. There might be cases, of course 

Mr. NEWLANDS. I do not believe for a moment that the 
value of the franchise ought to be considered in determining 
rates; but I am at a loss to know how it can be that it is not 
to be regarded as of value in the determination of rates and yet 
cas be assessed for purposes of taxation. It strikes me that the 
true rule and the just rule would be to exclude it from consid- 
eration in the determination of both rates and taxes. 

Mr. LA FOLLETTE. I shall hope to recur to this subject 
again before I conclude my argument. For the present, if 
agreeable to the Senate, I will proceed for a little time, and 
then I shall ask that I may be permitted to discontinue for the 
day and continue my remarks on Monday. 

It is a curious fact in railway condition* that the roads 
having the least value often have the greatest capitalizations. 
Capitalization merely reflects the policy of a particular manage- 
ment, or,' more correctly, the series of. managements through 
whose hands the road may have passed. It is quite apparent 
from these few. Wisconsin examples that capitalization has no 
relation whatever to true value or investment. 

It can not be objected that the foregoing valuations of railway 
property, embracing only the cost of the physical property, is 
not a sufficient basis for determining the value of the property 
on which the roads womld be entitled to earn a profit. It may 
be cited that certain nonphysical elements of railway value 
should be added in determining the valuation on which profits 
are to be allowed, just as such additions were made to the 
physical valuations in Michigan and Wisconsin to determine a 
basis for taxation. A moment's reflection and consideration of 
the nature of these elements of nonphysical value will show 
that this contention is unsound. 

General property is taxed, on the ad valorem basis, according 
to nn assessment on its market value. It is obvious, therefore, 
that in order to tax railroad property on the same basis as 
general property a determination of all the factors entering into 
its commercial value must be had. It is perfectly clear that cer- 
tain nonphysical elements, such as franchise and earning power, 
enter into this commercial value, and in determining a valuation 
for purposes of taxation an allowance for these elements is 
entirely proper. 
6922 



77 

But in determining a value on which profits are to be allowed 
this is not the case. The determination of these nonphysical 
values for the Michigan valuation w:is made by Mr. il. 0. 
Adams, of Michigan University, and statistician of the Inter- 
state Commerce Commission. The bases of this valuation have 
been made public. While the method of this determination is 
somewhat involved, it is based in the final analysis on the 
amount of the net earnings which the carrier is earning over 
and above 4 per cent on the value of the physical property. In 
other words, the nonphysical value of railroad property is, in 
the last analysis, the value of its power to charge excessive 
rates for transportation. It is quite obvious that this value 
can not properly be included in a valuation made as a basis for 
determining reasonable rates. 

Furthermore, a consideration of all the elements on which a 
nonphysical value can be based, as enumerated by Mr. Adams in 
his work, does not reveal any element entering into such valua- 
tion which is in any sense an investment on which the carrier 
has a right to demand a profit. 

TEXAS RAILWAY VALUATION. 

The valuation of railway property by the State of Texas 
possesses a particular interest because its primary purpose was 
the regulation of railroad capitalization and charges. The con- 
stitution of the State of Texas, as well as particular statutory 
enactments, prohibit fictitious railway capitalization. The rail- 
road commission law of that State provides that the commis- 
sion shall " ascertain, and in writing report to the secretary of 
state, the value of each railroad in this State, including all its 
franchises, appurtenances, and property." 

The Hon. John H. Reagan, chairman of the railroad com- 
mission of Texas, testifying before the industrial commission, 
described the work of the commission in valuing the Texas rail- 
roads. The investigations of the commission as to the cost of 
the many items entering into the roads was most thorough and 
comprehensive. Liberal allowances were made to cover the cost 
of procuring franchises and defraying the expenses of engineer- 
ing, as well as to cover interest on the investment during the 
time of construction. When the valuation was finally deter- 
mined, it was noticed to the several companies and forty days' 
time given in which such valuation might be contested. Said 
Mr. Reagan: 

We have done this in every case of valuation, and not one of our 
valuations of all the railroads of Texas has been contested. By our 
plan of valuation, if contested, we could ask what item in it was com- 
plained of, and from our files show the proof on which it was based. 

Under this valuation the value of all the railroads of Texas 
constructed prior to 1893 had been, at the time of Mr. Reagan's 
testimony, finally determined by the commission. The average 
value per mile of all these roads was $15,759. The aggregate 
value of all the roads so valued amounted on the 30th of June, 
1899, to $141,157,176. The aggregate capitalization of the rail- 
road companies, stocks and bonds, was $362,953,383, or more 
than two and one-half times the actual value. (This excessive 
capitalization was created prior to the passage of the stock and 
bond law, 1893.) 

I say the actual value, because when these companies were 
served with a notice that this valuation of a little over $15,000 
6922 



78 

a mile had been fixed for each mile of their road in that State, 
and when they knew that that valuation was to be made the 
basis of the rates which they were to be permitted to collect 
on the traffic of that State, they never appeared to contest the 
valuation. So it may be accepted, it seems to me, as an admis- 
sion on the part of the railroads that up to that time it was a 
fair valuation of their property within the State of Texas. 

Since the date of this valuation considerable improvements 
have been made on the old lines. A liberal estimate of the cost 
of these improvements, by the engineer of the commission, is 
from $4,000 to $8,000 per mile. These roads are fairly repre- 
sentative as to cost for railroads generally in the Southwest. 
And it is safe to say that the average actual cost of all the 
roads in that section did not exceed $25,000 per mile, and in fact 
was probably very much less. 

In valuing new roads at the present time the policy of the 
commission is a very liberal one, so that the present valuation 
is almost without exception in excess of the actual cost of the 
road. A new road recently valued comprises 300 miles of one 
of the principal lines of the International and Great Northern 
Railroad Company. This piece of railroad is in every respect 
modern, and the grade has been reduced to the maximum of 
three-tenths of 1 per cent, and the road will carry the heaviest 
equipment. With heavy grading and the usual number of 
bridges and culverts, the actual cost of constructing and equip- 
ping this road with the best modern equipment was from $25,000 
to $27,000 per mile. 

Will it be said that this policy of ascertaining the physical 
value of all railway property of the United States will be too 
expensive? Governments, like individuals, may be penny wise 
and pound foolish. The Senate voted at this session to spend 
$2,600,000 a year for ship subsidies. Shall we hesitate to pro- 
vide all that is necessary to place the regulation of railways on 
a solid foundation, and to lift the great burden of extortionate 
charge from the consumer. 

In the creation of a railroad commission and tax commis- 
sion in Wisconsin, and in the effort to compel the railroads to 
pay their proportionate taxes, there was the constant objection 
of the expense. But the results have already saved thousands 
of dollars where one has been expended. And what has been 
already saved is small in comparison with what will follow from 
the exercise of the power of the State vested in a commission to 
protect the citizens of Wisconsin from overcharges and favor- 
itism to persons and places. 

Mr. President, in concluding upon this branch of the subject 
I will venture to say that the question will never be settled in 
this country until it is settled upon a basis of the fair valuation 
of the railroad property of the country. I believe that we 
should start now and start right in clothing this Commission 
with full authority to ascertain this basis for establishing rea- 
sonable rates. 

I will now yield the floor with the hope that I may conclude 
my remarks on Monday. 



Monday, April 23, 1906. 

Mr. LA FOLLETTE. Mr. President, when I surrendered the 
floor on Friday afternoon I had brought the discussion up 
6922 



79 

to the point of a consideration of existing rates. I think I 
had shown that rates which are really reasonable rates can 
not be established and enforced without first ascertaining the 
true value of the property of the railroads as a basis for fixing 
the reasonable rates which will yield a fair return upon the 
property of the railroad company. 

I now propose to show, sir, that railway rates in this country 
are at the present time excessive. 

I know it is urged on all sides that rates are reasonable ; 
that no reductions of importance will be necessary under any 
law which we may enact ; that the important consideration for 
this body is to frame legislation that will insure equality of 
rates rather than reasonable rates; that no reductions of 
importance being required, there will be no necessity for a pro- 
vision in this bill for the valuation of railway property and 
no necessity of expending the money and the labor necessary to 
secure that valuation. 

The President has been quoted as saying in at least one public 
address that " there has been comparatively little complaint to 
me of the railroad rates being actually too high." Members 
of the Commission have been quoted as saying that complaint 
is made against unequal rather than against unreasonable 
rates, and Senators upon both sides of this debate have repeat- 
edly declared that there is little complaint as to unreasonable 
rates, but that the chief complaint is against discrimination. 
Granting this, it establishes nothing except the wide prevalence 
of complaint as to unjust discrimination. It does not seem to 
have occurred to anybody that this proves nothing with re- 
spect to the reasonableness of existing rates. 

Can anyone fail to see that there is small chance for the pub- 
lic to know whether rates are reasonable or extortionate? The 
whole matter is in the hands of the carriers. They have the 
facts upon which to predicate any approach to exact knowledge. 
If anyone knows the actual value of their property, they 
know it. They know the actual cost of operation, and they 
make the rate without check or hindrance. Is there any 
reason to suppose that they do not charge all the traffic will 
bear? 

We have complaints on all sides of discriminations in viola- 
tion of law and at the risk of heavy penalties. The railroads 
can make rates unreasonably high without fear of any punish- 
ment. Is it to be believed that they are guilty of violating 
the law against discrimination by rebates and otherwise, 
risking all the penalties it imposes, and that they fail to 
charge all the traffic can bear when there is- not the slightest 
danger of punishment for so doing? 

Ah, but why, then, is it that we have complaint of discrim- 
ination in almost every community, and no complaints of 
unreasonably high charges? It seems to me that the rea- 
son is so obvious as scarcely to require statement. There is 
a standard of comparison in one case. There is none in the 
other. Complaint is made of discriminations because the rate 
paid in one instance can be compared with the rate paid in 
another. There is some basis for comparison, and strong 
incentive for complaint. But what standard have we for 
comparison by which to test the question whether rates are 
too high? What information has the shipper, the producer, 

6922 



80 

the consumer, upon which to base complaint? He does not know 
what profit the carrier is making. All of the facts essential to 
form a judgment and lodge a complaint are beyond his reach. 
Because he formulates no complaint, prosecutes no action, 
proves neither that he is satisfied nor that he is without cause 
for complaint. 

Give the public some criterion, based upon the rules laid 
down by the Supreme Court, then it will know whether 
' its rate is just and reasonable, then it will be prepared to re- 
sist wrong. Make it the bounden duty of this Commission, 
arm it with full authority, furnish it ample assistance and 
money necessary to ascertain the actual value of railroad prop- 
erty, the actual cost of operation, and all the facts upon which 
to base a standard of reasonable rates. If complaints do not 
follow, it will then mean something when the President, the 
Commission, or anybody else says that there are " few com- 
plaints with respect to high rates." 

But, Mr. President, I venture to say that rates' are unreason- 
ably high, and that if the opportunity is ever presented to ascer- 
tain the value of railroad property, it will result in markedly 
reducing transportation charges generally throughout the coun- 
try. Before offering the direct evidence that rates have enor- 
mously advanced throughout the country in the last few years 
I wish to offer some significant testimony, dating from the 
Granger legislation. 

Illinois established a warehouse and railway commission with 
authority to fix maximum rates in 1873. The commission ap- 
pointed under this law established and has maintained a sched- 
ule of transportation charges. Iowa, in 1888, enacted a law 
creating a commission authorized to make rates. This commis- 
sion promulgated a complete schedule of railway charges for 
that State. No effort has ever been made to amend this legisla- 
tion, and the railway companies have acquiesced in the rates 
established by the commission. Under the law the carriers 
could have gone into court in Illinois or Iowa, attacked and set 
aside the rates fixed by these two commissions, if it had been 
possible for them to make it appear that such rates were un- 
reasonable and that they did not afford just compensation for 
the services rendered. That the rates established by this com- 
mission have stood unchallenged by the railroad companies in 
both States through all the years, must be taken as an admission 
on the part of the railroads that the rates are not open to com- 
plaint on their part. 

Wisconsin lies immediately north of Illinois and east of Iowa. 
In 1874 a law was enacted in Wisconsin fixing maximum rates 
and creating a commission authorized to make changes in the 
same from time to time. Two years later the railroads secured 
control of the legislature and repealed that law. From that 
time until 1905, or for a period of twenty-nine years, these cor- 
porations have been powerful enough to defeat all legislation to 
regulate transportation charges in that State. We have, there- 
fore, an opportunity to compare rates in Wisconsin, where the 
railroads have controlled for twenty-nine years, with rates in 
Illinois and Iowa, where they have been controlled and estab- 
lished by State authority. This comparison offers, therefore, 
I submit, a most excellent test as to whether railroad companies 
may be trusted, when left without supervision and control, to 
make rates with due regard to the public interests. 
6922 



81 

The two principal railroads in Wisconsin are the Chicago and 
Northwestern and the Chicago, Milwaukee and St. Paul. These 
railway lines likewise run through the States of Illinois and 
Iowa. With a view to instituting comparison between the rail- 
road-made rates of Wisconsin and the State-made rates of Illi- 
nois and Iowa I arranged all the stations on the St. Paul road 
and all the stations on the Northwestern road in Wisconsin in 
tables, showing the number of miles to each station from the 
principal market. From the published schedules of the railroad 
companies I obtained and placed in the tables opposite the name 
of each station the cost of shipping in and out every class and 
kind of freight, whether in carload lots or less than carload 
lots, including commodity rates, between each station and its 
principal market within the State. I then placed side by side 
with the Wisconsin rates, Iowa rates, fixed by the Iowa commis- 
sion, for the shipment, in like manner of an equal quantity of 
the same kind of freight the same distance in that State. The 
rates for a like number of stations in Illinois equally distant 
from market in each case with the Iowa and Wisconsin sta- 
tions were next obtained and incorporated into the table. 

I was then in a position to ascertain the exact difference be- 
tween the so-called " reasonable rates " established for Wiscon- 
sin by the railroads without State regulation with the reason- 
able rates established under State control in Iowa and Illinois. 
The comparison thus worked out clearly demonstrated that the 
railroad companies were exacting from the people of Wisconsin 
from 20 to nearly 70 per cent higher rates than they received in 
Iowa and Illinois for a like and equal service. I may add that 
the rates in Illinois have been considerably reduced by the com- 
mission of that State since these comparisons were made, as is 
shown by the following telegram recently received in response to 
an inquiry which I addressed to Governor Deneen : 

Springfield, III., April l, 1906. 
Hon. R. M. La Follette, 

Washington, D. C: 
Twenty per cent reduction was made on first five classes on Decem- 
ber 5, 1905, went into effect on January 1, 1906. No railroad has 
appealed to the courts against it. Commission has under considera- 
tion question as to whether reduction should be made in remaining five 



Charles S. Deneen. 
So Senators will see that in view of the reduction recently 
made in the Illinois rates, as stated by Governor Deneen, it is 
clearly manifest that the Illinois rates, with which I instituted 
comparison, in 1903, were themselves above the reasonable rate 
level. Furthermore, it should be borne in mind that the Iowa 
rates were instituted as maximum reasonable rates in 1888, and 
since that time there has been no substantial reduction. But 
there have been enormous increases in the traffic and in the car- 
rying efficiency of the roads which naturally result from the in- 
dustrial development of a great and rapidly growing State like 
Iowa. As a consequence of these changes, the cost of handling the 
traffic has decreased, and rates that yielded a fair profit in 1888 
yielded more than a fair profit in 1903, when I used these rates 
as a standard of comparison to test the reasonableness of rates 
in Wisconsin. Notwithstanding the fact, Mr. President, that 
the Illinois and Iowa rates were without doubt higher than a 
reasonable standard, the Wisconsin rates, over which there was 
6922 6 



82 

no State control, were higher than the Illinois and Iowa rates 
by 20 to 70 per cent. 

Whether the rates in Iowa and Illinois are reasonable in 
themselves is known only to the railroad companies in those 
States. Neither the commission of Iowa nor the commission of 
Illinois ascertained the value of the railroad property of their 
respective States, thus establishing a basis upon which to fix 
rates reasonable per se. As before stated, that they are, on the 
whole, considerably above the reasonable rate line, may be 
safely assumed; otherwise the railroads would have brought 
action to set them aside as not offering just compensation for 
the services performed. 

I have cited these comparisons because they prove conclusively 
that it is never safe to assume that the railroads uncontrolled 
make reasonable rates. 

It might have been possible to furnish proof that the rail- 
road-made rates of Wisconsin were unreasonably high without 
going into the other States for comparison. But few States 
in the Union are more richly endowed than Wisconsin with 
magnificent water powers. With her splendid waterways well 
distributed over the State, her wealth of raw material for di- 
versified manufacturing near at hand, her factories would natu- 
rally be so located as to utilize the free power furnished by 
nature. 

But with the defeat of all effort to reestablish State control 
of railway rates, the only check upon excessive transportation 
charges for the whole Commonwealth is that afforded by the 
water transportation of the Great Lakes system. Nineteen of 
the seventy-two counties of Wisconsin border upon Lakes Michi- 
gan and Superior. For three hundred miles along her lake 
shore many splendid natural harbors offer water communication 
with the outside markets. Along the lake shore, through these 
nineteen counties, the railroad rates have always responded to 
water competition, and rule much lower than rates in the 
interior of the State. It is a significant fact that more than 
seventy per cent of the capital invested in manufacturing in 
Wisconsin is located in the nineteen counties situated on Lakes 
Michigan and Superior. Except for the fact that water trans- 
portation influences to their advantage freight charges by rail, 
these nineteen counties afford no better location for manufactur- 
ing plants than most of the other counties of the State, where are 
located the abundant supplies of raw materials and magnificent 
water powers. Indeed, many excellent water powers have been 
abandoned and hundreds left undeveloped because the high 
freight rates in the interior have forced nearly three-quarters of 
the manufacturing into a little more than one-fourth of the lake 
shore counties of the State. 

Mr. President, there is no warrant for the belief that people 
of the country are, upon the whole, enjoying reasonable rates. 
This view has been skillfully engrafted upon the credulous 
public. But, sir, the known facts demonstrate its falsity. The 
Supreme Court has determined that the carrier is entitled to a 
fair profit, based upon a fair valuation of his property. Is 
this the basis upon which the railroads fix their charges to-day? 
By no means. 

No one will deny that, at the outset, they bond and stock 
their properties away in excess of a fair value. Then they tax 

6922 



83 

transportation to pay a " fair return " on this inflated value. 
From that time forward, as rapidly as the traffic can possibly 
bear the burden, additional stocks and bonds are issued with- 
out additional investment, and transportation is further taxed 
to pay a " fair return " upon this added inflation. Again and 
again this process is repeated. It is an endless-chain system. 

I again offer a specific illustration furnished by recent history 
in Wisconsin of the imposition of excessive charges for transpor- 
tation by railroads. It happened that while the State was mak- 
ing an effort to ascertain the fair value of railway property, for 
the purpose of enforcing the just taxation of such property, it- 
was at the same time prosecuting an investigation of transporta- 
tion charges and railway earnings as a basis for legislation to 
regulate rates. 

The average annual net earnings for the Chicago and North- 
western Railway Company on its Wisconsin traffic, as stated in 
its official report to the State, amounted to $3,919 per mile. The 
net earnings thus amount to a 6 per cent income on $65,317 
per mile. In other words, the people of Wisconsin were paying 
freight charges which netted the Northwestern Railway Com- 
pany 6 per cent on $65,317 a mile. The State board of assess- 
ment, authorized by statute to ascertain the value of the rail- 
road property of the State as a basis for taxation, notified 
the Northwestern Railway Company to submit the valuation of 
its property to such board. This it did. 

The fair valuation of the property of the Northwestern Rail- 
way Company in Wisconsin was thus shown by the corporation 
to amount to $25,382 per mile. 

The average net earnings for the St. Paul Railway Company 
in Wisconsin for the same period amounts to 6 per cent on 
$62,633 per mile. Wisconsin traffic was therefore charged at 
a rate high enough to produce a net income upon $62,633 per 
mile. This company, when called upon by the board of assess- 
ment to furnish the true value of its property for taxation, 
submitted such statement, by which the road proved the value 
of its property in the State to be $26,340 per mile. 

Mr. President, nothing could be more conclusive as evidence 
of the fact that railroads are charging the people rates high 
enough to pay interest and dividends on more than twice the 
fair value of their property. 

TRANSPORTATION CHARGES ADVANCING. 

With the carriers free from any governmental supervision of 
their charges, and with all restraints of competition eliminated 
by combination, the natural and inevitable result is the advance 
of transportation charges to the public. The experience of the 
past few years shows how unwise it is, in the absence of these 
positive restraints, to rely upon the railroads to interpret the 
" laws of business " in the interests of the country and the in- 
dustrial development of the communities which they serve. 

Mr. BEVERIDGE. Mr. President 

The VICE-PRESIDENT. Does the Senator from Wisconsin 
yield to the Senator from Indiana? 

Mr. BEVERIDGE. Will the Senator from Wisconsin permit 
me to ask him a question? 

Mr. LA FOLLETTE. Yes. 

Mr. BEVERIDGE. Were these railroads actually capitalized 
up to sixty-two or sixty-five thousand dollars a mile? 
6922 



84 

Mr.*LA FOLLETTE. No, they were not in this particular in- 
stance — that is, two were not — but they were capitalized some 
thousands of dollars per mile more than they gave as their true 
value. Another road in Wisconsin was capitalized at nearly 
the sum mentioned. I simply used that illustration in this con- 
nection to show to the Senate and the country, taking these two 
leading roads of Wisconsin, that it is never safe to trust the 
railroads to fix reasonable rates. 

Mr. BEVERIDGE. I understand that point. But the point to 
which my mind was going was that made by the Senator imme- 
diately preceding this, to wit, that here there had been the issu- 
ance by a railroad company of stocks and bonds beyond anything 
that justified it, as the Senator said, and then the assessment of 
rates to pay dividends upon that overcapitalization. 

Mr. LA FOLLETTE. Yes. 

Mr. BEVERIDGE. Assuming that to be true, has the Senator 
thought out any remedy for it? That is to say, suppose a rail- 
road company has issued stock far beyond what it should have 
issued, far beyond the value of the road ; that those stocks are 
bought by the innocent public, by innocent holders, and are held 
by them as an investment, and that in order to pay dividends 
upon those stocks the railroad charges what the Senator claims 
are excessive rates. Has the Senator thought out any remedy 
for that situation? 

Mr. LA FOLLETTE. I think as I progress in this discussion 
it will be apparent to my friend, the Senator from Indiana, what 
the real remedy is so far as all the people of this country are 
concerned. 

Mr. BEVERIDGE. I did not mean to anticipate the Senator. 

Mr. LA FOLLETTE. No ; I understand. 

Mr. BEVERIDGE. I think every person who has given any 
attention at all to the question of overcapitalization and the 
assessment of charges to pay dividends upon the overcapitali- 
zation has been confronted at the very outset by the difficulty 
which is presented by the fact that the securities are held by an 
innocent public on the one hand, and on the other hand the 
innocent public are paying the overcharges. I thought perhaps 
the Senator had thought out a remedy for that. 

Mr. LA FOLLETTE. I think, if I may anticipate in just a 
sentence what I intend to say a little more fully later on, the 
Supreme Court has suggested an answer to the question of my 
distinguished friend from Indiana, and that is this : If a rail- 
road line has had issued bonds and stocks away in excess of the 
investment of the fair value of the property, the public can not 
justly be taxed to pay dividends upon stock and interest upon 
bonds thus issued. In other words, the old rule that puts 
every man when he makes a purchase upon his inquiry as to 
the value of the property he purchases requires that the man 
buying stocks and bonds shall know whether there is back of 
those stocks and bonds in which he invests his money that value 
which is specified on their face. 

Mr. BEVERIDGE. If the Senator will permit me further, 
it would strike me right here that in the matter of fixing railway 
rates would come the question of just compensation, or even of 
confiscation. 

Mr. TILLMAN. We are interested in this discussion, and 
I suggest that the Senator from Indiana raise his voice a little. 

Mr. BEVERIDGE. I will. 
6922 



85 

Mr. TILLMAN. And that he change his position so that his 
voice will be sidewise to us instead of his back being to us. 
We should like to hear what he is saying. 

Mr. BEVERIDGE. I was addressing the Senator from Wis- 
consin. However, I will try to comply with the suggestion 
of the Senator from South Carolina. 

Suppose that here is the overcapitalization to which the Sen- 
ator refers, and rates are based upon it in order to pay 
dividends upon that capitalization. This overcapitalization 
has been absorbed by the innocent purchasing public. Upon the 
theory that the railroads should charge rates which would pay 
a fair return upon the actual just value of the road no divi- 
dends whatever would be paid upon the overcapitalization. 
Therefore, when such rates were fixed, the road would at once 
say " this is the taking of property without just compensation." 
That is the point to which I wish to direct the Senator's attention. 

Mr. LA FOLLETTE. In response to that question the Su- 
preme Court would say, as it has said heretofore, that it is not 
required of the public to pay dividends and interest on water, no 
matter who owns it, but that it shall pay dividends and interest 
on the fair value of the property, and nothing more. The Su- 
preme Court has said that if any railroad company has issued 
stock and bonds in excess of the fair value of its property it must 
suffer, and those who hold the stock and bonds must suffer the 
consequences of such action ; that it is unjust to impose that bur- 
den upon the public. If railroad companies are to be permitted 
to issue stocks and bonds without limit, if there is to be no 
restriction whatever, and none has been imposed except in the 
State of Texas, so far as I am advised 

Mr. DOLLIVER. And Massachusetts. 

Mr. LA FOLLETTE. Massachusetts; yes. There is State 
regulation in Massachusetts, but with these exceptions the di- 
rectors of a railroad company may, without any limitation 
whatever, burden the public with transportation charges to pay 
interest and dividends, not upon capital invested in the business 
of transportation, but upon any figure they choose to put upon 
the paper certificates they issue. 

Mr. MALLORY. May I ask the Senator from Wisconsin a 
question ? 

The VICE-PRESIDENT. Does the Senator from Wisconsin 
yield to the Senator from Florida? 

Mr. LA FOLLETTE. I do. 

Mr. MALLORX. I understood the Senator, a while ago, to re- 
fer to the case of a reduction of 20 per cent in the rates on cer- 
tain classes of freight in Illinois. Was that contested? 

Mr. LA FOLLETTE. No; and I am informed by Governor 
Deneen that there has been no intimation on the part of the 
railroad companies that they would go into court and contest 
this further reduction of rates in Illinois. 

Mr. NEWLANDS. Mr. President 

The VICE-PRP]SIDENT. Does the Senator from Wisconsin 
yield to the Senator from Nevada? 

Mr. LA FOLLETTE. Certainly. 

Mr. NEWLANDS. In considering the question as to the at- 
titude of innocent purchasers of overcapitalized stocks to this 
question, does not the fact that thus far Congress has been 
absolutely apathetic and indifferent as to legislation upon this 

6922 



86 

subject, and whilst it has had the power, has never yet taken 
steps to check overcapitalization, prevent us from legislating in 
such a way as to deprive these innocent purchasers of over- 
capitalized stock of revenue upon their investment? 

In this connection let me suggest to the Senator further, that 
the Supreme Court, in laying down the rule which shall govern 
regulating bodies in the determination of rates, has announced 
that the right of the corporation is to have a fair return upon 
a fair valuation of its property. But in treating of the ques- 
tion of valuation the Supreme Court has indicated, in Smyth v. 
Ames, that the Commission can take into consideration not only 
the mere cost of reproduction, but can also take into considera- 
tion the amount of stocks and bonds issued, and can also take 
into consideration the income received by the corporation from 
the existing rates. It indicates that these things ought to be 
considered, and that many other things might be considered in 
reaching a valuation. 

Will the Senator bear with me a moment longer? I think 
this is a very important question, and I am quite in sympathy 
with his general view. I believe we should have a valuation 
of the railways, tnd I believe the railroad companies should be 
confined in the future to a fixed percentage upon that valua- 
tion ; and I believe if we can only hare a fair valuation now, 
even if it includes these excessive issues, even if it is a valua- 
tion based upon excessive rates, if we can have a starting point 
now and protect ourselves against overcapitalization in the 
future, we will do a great service to the entire country. 

******* 

Mr. LA FOLLETTE. Mr. President, I will endeavor to re- 
call the question my friend the Senator from Nevada pro- 
pounded at the beginning of his remarks, which bears upon the 
rights of the " innocent purchaser." I will say, with reference 
to that question, I know of no reason, sir. why a different rule 
should be applied to the man who purchases railway stocks or 
railway bonds than the rule which is applied to every man who 
makes a purchase of any kind of property in this country. Any 
man who purchases other kinds of property, if he goes into 
court to contend that he has paid more than that property is 
worth, is confronted with the rule of law that he who buys 
must inquire as to the value of the property he buys. 

Railway stocks and bonds are purchased for the purposes of 
speculation quite largely. There is always the element of specu- 
lation in the investment which induces the purchaser to take 
some chances. Is there any reason why the men who invest 
in railway stocks should have applied to them and to their in- 
vestments a different rule than the man who purchases a farm 
or a horse or any other piece of property? That would cer- 
tainly be very unjust. 

I say, therefore, that those who hold railway stocks and bonds 
in the United States to-day hold them under the rule of law 
which requires them to know that they have invested their 
money in property which is worth the purchase price. 

Mr. MONET. Will the Senator permit me to interrupt him? 

The VICE-PRESIDENT. Does the Senator from Wisconsin 
yield to the Senator from Mississippi? 

Mr. LA FOLLETTE. I do, sir. 
6922 



87 

Mr. MONEY. Sympathizing entirely with the Senator from 
Wisconsin, I should like to ask him a question right at this 
point. Has Congress or the legislature any authority to make 
any inquiry into the value of the road except for the purpose of 
one of two things — one to fix the rate of taxation and the other 
to fix the rate of tariff for carriage? If Congress should under- 
take to investigate that subject with any view whatever of 
protecting the investor in railway stocks and bonds and in- 
vestments in their property, has Congress any authority what- 
ever to do it? 

Mr. LA FOLLETTE. Most assuredly not. And no govern- 
ment has either the legal or the moral right to impose upon its 
people the payment of transportation charges upon any other 
basis than that suggested by the interrogatory of the Senator 
from Mississippi — the fair value of the property of the carrier. 

When the opposition raise the question of the confiscation 
of watered stocks and bonds, I remind them that every dollar 
taken from the people who pay the freight which goes to pay 
interest and dividends on overcapitalization, is taking exactly 
that much more than "just compensation" for the transporta- 
tion service, and is a confiscation of the money — that is, the 
property — of the people, the innocent public who are thus over- 
taxed on transportation. 

I now remember that I did not answer one question asked 
by the Senator from Nevada [Mr. Newlands]. He asks, If 
Congress has heretofore neglected its duty in respect to this 
matter, are we not committed to policies which have been pur- 
sued by other Congresses? That is, if Congress in the past has 
failed in its duty to the public, are we not, therefore, bound to 
continue to impose burdens on the generations to come? Are 
we not bound to follow the bad precedent of violation of public 
trust? I say no, sir; most positively no. 

We have a duty 

Mr. NEWLANDS. Mr. President 

Mr. LA FOLLETTE. I beg the Senator's pardon. We have 
a duty to perform, a present duty. We should faithfully exe- 
cute the public trust for those who have commissioned us to 
protect their interests without respect to the violations of obli- 
gation of which any preceding Congress may have been guilty. 

The VICE-PRESIDENT. Does the Senator from Wisconsin 
yield to the Senator from Nevada? 

Mr. LA FOLLETTE. I do, sir. 

Mr. NEWLANDS. The Senator from Wisconsin has misap- 
prehended me if he thinks I claim that we are committed at all 
to the policy which has hitherto prevailed. My query was as 
to values built up in this country in the market on an income 
of these railroads permitted by Congress when it had the regu- 
lating power, and those values now in the hands of innocent 
purchasers, people who had nothing whatever to do with the 
overcapitalization, whether that does not constitute a considera- 
tion which would prevent us from taking action that would 
absolutely obliterate the $6,000,000,000 of value in this country 
so held. 

Mr. MONEY. They are not values. 

Mr. LA P^)LLETTE. I will simply say in answer, as sug- 
gested by the Senator from Mississippi, that they are not values, 
6922 



88 

and that the people who made the purchases were bound to 
know whether they were buying water or buying property of 
value. 

Mr. NEWLANDS. Yes; but the Senator 

Mr. LA FOLLETTE. I ana very anxious to conclude to-day, 
if I can. 

Mr. NEWLANDS. I will take only a second. 

The VICE-PRESIDENT. Does the Senator from Wisconsin 
yield further to the Senator from Nevada? 

Mr. LA FOLLETTE. I do, sir. 

Mr. NEWLANDS. I am not talking now about the par value 
of the overcapitalized stock, but the market values, and the 
Senator must recollect that these values are built up and based 
on the revenues of the companies ; that the companies enjoy 
their revenue from rates, and that these rates have been fixed 
by these common carriers with the sanction or permission or 
as the result of the inaction of Congress. We gave them the 
right, in the first place, to fix their own rates and placed no 
restriction upon their charges, and we never yet have exer- 
cised the absolute power of fixing rates. So the rates were 
rates fixed under the law and the income bad its basis upon 
lawful rates, even though they might have been excessive, and 
the present market value is based on such income. 

Mr. LA FOLLETTE. Mr. President, the income did not have 
its basis upon lawful rates. An unreasonable or excessive rate 
has always been an unlawful rate. Without any action upon 
the part of Congress, every unreasonable rate at common law 
was an unlawful rate. Because these corporations may have 
been able to prevent Congress, derelict in its duty, from enact- 
ing legislation which would protect the public against extortion, 
are we forever to continue giving sanction and approval to the 
great wrong? I say, Mr. President, that the market value of the 
water in securities represents the power to charge extortionate 
rates to the public, and nothing more. There can be no " inno- 
cent purchaser " of a share in the proceeds of this unjust and 
unlawful extortion. 

No, sir. If we undertake to follow such a precedent as that 
I venture to suggest to my friend that there will come a Senate 
and a House of Representatives commissioned directly from the 
people who will better represent the public interest. 

Mr. President, I was just saying when interrupted that the 
experience of the past few years shows how unwise it is in the 
absence of these positive restraints to rely upon the railroads 
to interpret the " laws of business " in the interest of the 
country and the industrial development of the communities 
which they serve. 

The menace of combination of carriers has been called to the 
attention of Congress by the Interstate Commerce Commission 
from the beginning. The advances in rates were predicted, and 
when they were made they were announced by the Commission. 
The report of the Commission for 1900 contained the following 
warning : 

It is idle to say that freight rates cau not he advanced. During 
the past year they have heen, by concerted action upon a vast volume 
of traffic, advanced in every part of the country. It is equally idle to 
say that they will not be advanced. It is both human nature and 
the lesson of history that unlimited power induces misuse of that 
power. 

6922 



89 

Again, in its report to Congress in 1903, the Commission said : 

One of the most significant things in recent railway operation is the 
steady advance of the cost of transportation of freight by rail. A 
few years ago the impression was general that freight rates could 
not, and would not, be advanced. Railway traffic officials frequently 
affirmed this in testimony. When the Commission had under consid 
eration certain consolidations of railway property, the eminent gentle- 
man who brought them about stated, under oath, that the purpose 
was not to advance, but rather to reduce rates. Recent history belies 
these predictions. 

This statement was- followed in the report by specific state- 
ments of these advances in rates. It was pointed out that in a 
few instances class rates had been advanced so as to be higher 
than ever before in the history of the Commission. To quote 
the Commission : 

The rates upon those commodities that constitute the bulk of inter- 
state traffic have been advanced in nearly all sections. Coal rates have 
almost without exception been increased. The same is true of iron 
schedules. Rates upon grain and its products, lumber, live stock and 
its products are generally higher to-day than four years ago. 

Advances had been effected by the advance of hundreds of 
important commodities in the classification and also by the clas- 
sification and also by the classification of traffic formerly given 
reduced commodity rates. 

In the evidence taken before the committees of Congress there 
is a great body of complaint against such advances in rates. In 
all this complaint there is the underlying idea that the rates are 
advanced to the point of unreasonableness. Of course the com- 
plainant is not in a position to prove that rates are in fact un- 
reasonable because Congress has never provided for a valuation 
of railway property. When that is done these people will 
demonstrate that their rates are unjustly high. The conditions 
represented, however, merit the consideration of those who have 
not yet heard any complaint of rates unreasonable per se. 
These complaints represent, among others, the great agricul- 
tural interests of the Central States, the great cattle interests 
of the West, the great lumber interests of the South, and the 
great paramount interest of the whole consuming public. 

The advances in rates are in force in every section of the 
country. They are in force on nearly every important article of 
freight shipment. Many of them were put in force through ad- 
vances of articles in the classifications. Of the three classifica- 
tions covering the country one shows 572 commodities so 
advanced another 531, and the third 240. In addition to these 
advances there were very great advances in commodity rates on 
several important articles of shipment, such as iron and steel, 
soft coal, and lumber. Besides these advances in rates the pub- 
lic burden has been increased by the greatly increased cost of 
transportation by private-car and refrigerator companies. 

Among the commodities advanced in the official classification 
hay was advanced from sixth to fifth class. The representative 
of the National Hay Association declared that this advance 
made the rates on hay prohibitive for long distances, and in 
effect practically excluded the hay crop of the North Central 
States from tlm Eastern markets. The change in the classifica- 
tion advanced the rate on hay, Chicago to New York, for in- 
stance, $1 per ton. The average advance is estimated by the 
Interstate Commerce Commission at 80 cents, which, applied 
to the annual tonnage effected, equals a total annual advance of 
6922 



90 

$2,434,000, or a total to the date of the statement of about 
$10,000,000, and if continued to the present time $15,000,000. 
This is the result of only one of the 572 advances in one 
classification. 

Another commodity similarly advanced in classification is 
sugar. The people have paid out, because of this advance, from 
$5,000,000 to $0,000,000 more than they would have paid if the 
advance had not been made. 

Of course, this advance does not make much difference in 
the homes where incomes are large and luxury prevails. But, 
Mr. President, the additional burden falls with great weight 
upon the little homes, for a few dollars, more or less, is a 
matter of great importance in the strict economy which is 
necessary to the very existence of the home life. 

The most vigorous complaint before the Congressional com- 
mittees against advances and overcharges in freight rates was 
,that made by the live-stock associations. 

I suppose, Mr. President, it was vigorous because the live- 
stock associations represent large interests and are able to pre- 
sent their cases strongly and fight them out before the Congres- 
sional committees and the Interstate Commerce Commission. 

These excessive rates for the transportation of live stock 
vitally affect the prosperity of the whole agricultural West. 
The agriculture of nearly all of this whole section derives the 
largest part of its money income from the sale of live stock. 
Live stock is the mo9t valuable single finished product of the 
whole agricultural industry. It constitutes about 12 per cent 
of the total tonnage of the traffic of the western roads. 

This great interest has spent thousands of dollars in prose- 
cuting its complaints before the Interstate Commerce Commis- 
sion and in trying to get relief from the oppression of the 
railroads. The complaints show advances in the rates for ship- 
ment of cattle to northwestern feeding grounds from $55 per 
car to $100 per car — advances on which the railroads have 
extorted not less than $3,000,000. They present the advances 
by the addition of a terminal charge of $2 per car for delivery 
at the Union Stock Yards at Chicago — an extortion amounting 
through the years to over $6,000,000. The complaints further 
show that the rates to markets have been advanced from 4^ 
cents to 9i cents per 100 pounds, or from 12 per cent to 31 per 
cent, and that the rates in force are higher than they have ever 
been in twenty years, or since the filing of tariffs and the 
establishment of the Interstate Commerce Commission give us 
a record upon which to base accurate statement of specific rate 
changes. 

The cattlemen complained that all these rates are " unjust, 
unreasonable, and unlawful." They supported their complaints 
with comparisons of these rates with the maximum reasonable 
rates established by the State of Texas, and showed that the 
interstate rates for like services were 37 to 41 per cent in ex- 
cess of the rates fixed in Texas. 

Further, the cattlemen complained that these increases in the 
rates had been accompanied by marked deterioration in the 
service, causing great losses to the shippers. 

When these complaints of the cattlemen were presented to the 
railway managers, they answered, with supreme assurance: 
" Oh, we expected them to complain." They did complain. The 



91 

complaints have been prosecuted at great expense of time and 
labor. At great trouble and expense these complaints of " un- 
just, unreasonable, and unlawful " rates have been laid before 
Congress. 

In February, 1903, an advance was ordered by the roads of 
2 cents per 100 pounds, or $8 per car, in all rates on southern 
pine lumber from all southern producing points from Georgia 
to Texas, inclusive, to all markets north of the Ohio River, to 
all points in the Middle and Eastern States — to practically all 
outside markets to which the lumber is shipped. This advance 
20,000,000 tons. On this traffic the total increased charge 
amounts to $8,000,000 annually, and if figured from the time the 
advance was made to the present time this advance amounts to 
not less than $25,000,000. 

Not only is there complaint of this advance in the rates to 
northern markets, but in the lumber districts of the South there 
is the most vigorous complaint of the unreasonableness of the 
rates for the distribution of lumber locally. Comparison is 
made with the State rates of Texas to emphasize the necessity 
of a law to prevent unreasonable rates on interstate traffic, 
but this complaint, like that of the cattle raisers, will not be 
satisfied by simply giving them relatively equal rates. They 
are entitled to real justice, not merely relative justice. 

These are only a few of the many advances in rates of which 
we find complaint in the hearings. The Interstate Commerce 
Commission reported advances of 10 cents per ton on soft coal 
and amounting on the traffic affected to $10,000,000 annually. 
Advances on iron and steel articles were estimated by the Com- 
mission to amount to $4,000,000 per year. 

Mr. President, I shall next consider one of the defenses 
which the railroads make when charged with having greatly 
advanced their rates. 

INCREASE IN TON-MILE REVENUE. 

Notwithstanding that specific advances have in recent years 
been made in the rates on many important commodities, and gen- 
eral advances have been made through classifications, it is con- 
tended that the average freight revenue per ton-mile shows 
that rates have been reduced. Senators well understand that 
the per ton-mile rate means the average revenue from hauling 
a ton of freight 1 mile. This contention is suported with 
comparisons of the rates per ton per mile for various years, so 
selected as to support that claim. While it is true that the 
ton-mile rate shows a decrease from many years ago, since the 
year 1899, which marks the inauguration of the great period of 
combination and the elimination of competition, the ton-mile 
rate, even, shows a constant upward tendency year after 
year. 

For these years the statistical reports of the Interstate Com- 
merce Commission show the following average revenue per ton- 
mile: 

Cents. 

1899 0. 724 

1900 . 729 

1901 . . 750 

1902 . 757 

1903 . 763 

1904 . 780 

6922 



92 

The increase, now, mark you, from year to year on each ton- 
mile is not large, but the aggregate increase when applied to 
the total traffic which it affects is enormous. The increase 
from 1899 to 1904 amounts to 0.56 of a mill per ton-mile. This 
increase, on the traffic of 1904 (175 billion ton-miles), equals a 
hundred million dollars. This is the amount the public paid 
in additional freight charges on the traffic of that year alone 
more than they would have paid had the rate of 1899 not been 
advanced. 

But the increase in freight rates is only partly measured by 
the increase in the ton-mile revenue. The revenues are the prod- 
uct of the rates and the traffic. Both of these quantities are 
variable. The rates, as we have seen, have been advanced to in- 
crease the average revenue per ton per mile. The traffic, on the 
other hand, has undergone certain changes which tended to de- 
crease the revenue per ton per mile. If there had been no ad- 
vance in rates, the changes in traffic conditions would have 
lowered the per ton-mile revenue. Thus the tendency of 
traffic changes has been to offset and conceal the effect of the 
increases in rates on the revenue per ton per mile. The net 
result of these changes in the traffic conditions from earlier 
years to 1904 is that a ton-mile of traffic represents a less valu- 
able service in 1904. In other words, the public in buying this 
unit amount of traffic in 1904 get less for the price paid. The 
principal traffic changes producing this effect are that the ton- 
mile of transportation service in 1904 represents, as compared 
with former years, (1) a greater proportion of low-grade, cheap 
traffic; (2) a greater proportion of long-haul traffic; (3) a 
greater proportion of carload (as against less than carload) 
traffic. 

INCBEASED TRAFFIC AND ECONOMY. 

The foregoing enormous advances in rates have been made in 
the face of every known force in transportation conditions 
which tend naturally to reductions in rates. The density of 
traffic has increased enormously. The average length of haul 
has increased. The efficiency of road and equipment to handle 
traffic economically has been vastly increased. The public has 
every right to demand lower rates as the traffic increases and 
industrial development brings about greater efficiency and econ- 
omy in the cost of performing transportation services. The com- 
mon carrier is in any case entitled to only such profits as will 
yield a fair return on the fair value of the property employed. 

How the rates have been advanced I have already shown. 
Now, I wish to present a few facts to show why the rates 
should have been reduced. 

It is a fundamental principle in the laws of transportation 
cost that the average cost per ton per mile varies inversely with 
the number of ton-miles hauled. Or to state it more plainly, 
if less exactly, that the greater the amount of traffic hauled 
the less the cost of hauling each ton-mile. It does not cost 
twice as much to haul a carload of 20,000 pounds as to haul 
a carload of 10,000 pounds; it does not cost twice as much to 
haul a carload 100 miles as to haul it 50 miles. Based on this 
fact, every test applicable demands a lower cost, and therefore 
lower rates in 1904 than in 1897. 

The most significant factor in determining the ton-mile cost is 
the average number of tons of freight hauled in each train. 

692'i 



93 



You can haul a train of thirty loaded cars 100 miles at very 
much less cost per car than you can haul a train of ten cars 
the same distance. That must be very apparent to everyone. 
Mr. Woodlo-k, in his book " The Anatomy of a Railroad Report," 
analyzing the cost per ^on per mile, concludes that the train 
load is the supreme factor in the determination of ton-mile 
cost; that it is the test of economical railroading, and that it 
" determines a larger proportion of the ton-mile cost than all 
other factors put together." 

The number of trains run directly affects about 60 per cent of 
all operating expenses. The larger the train load the fewer 
trains will be required to handle a given amount of traffic. 
Hence it may be said, roughly speaking, that 60 per cent of the 
average cost per ton-mile is reduced in direct proportion as the 
number of tons hauled in each train load is increased. There 
are other minor factors, such as tons per car, tons per locomo- 
tive, etc., Which affect the ton-mile cost in a less degree, but 
when all such factors have a common tendency, the effect of 
each factor augments the force of all the factors in combina- 
tion. 

The statistical reports of the Interstate Commerce Com- 
mission show that the average numer of tons of freight carried 
per train load in 1897 was 204 tons, and in 1904, 307 tons, or 
an increase of 50 per cent, and representing the relative decrease 
in the cost of handling the traffic per ton per mile. In like 
manner, the average number of tons hauled per each freight 
car in operation increased 27 per cent, and per -each locomotive 
33 per cent. 

Perhaps the force of these changes in traffic conditions as 
tending to reduce the cost per ton per mile will be more readily 
appreciated if stated conversely. Given 1,000,000 tons of freight 
to be moved in 1897 and 1904, the changes in traffic density and 
other conditions effect the following savings in the amount of 
equipment necessary and services required : 





1897. 


1904. 


Savings 


in 1904. 




Num- 
ber. 


Per 

cent. 


Services. 


4,902 
218 

1,647 
27.5 


3,257 
194 

1,292 
20.6 


1,645 

24 

355 
6.9 


50.5 


Train men. 


12.3 


Equipment. 
Cars required 


27.5 


Locomotives 


33.2 







Further consideration of freight traffic conditions only serve 
to emphasize the showing made by the above figures. The total 
number of tons of freight carried increased 76.6 per cent; the 
number of tons carried 1 mile — the total number of absolute 
units of traffic — the increase during the seven-year period, 83.4 
per cent. The traffic density, i. e., the number of tons carried 
1 mile per mile of line, shows the remarkable increase of 60 
per cent, and in the face of all the conditions the best argument 
the roads have to offer in defense of the charges is the state- 
ment that their average revenue per ton-mile has been reduced 

6922 



94 

from 7.98 mills in 1897 to 7.80 in 1904, a reduction of 0.18 mill, 
or 2.26 per cent. 

In respect to passenger traffic it is sufficient to point out that 
the same tendencies, only slightly less in degree, are true, as in 
the case of freight traffic. As an offset to this, the average rate 
per passenger per mile shows a reduction of 0.8 of 1 per cent. 
The figures are given in detail in the following table : 

Increase in traffic. — A percentage conclusion oased upon the increase in 
the volume of traffic and the efficiency of the road to handle the traffic. 



Item. 


1897. 


1904. 


In- 
crease. 


Average number of tons carried: 


204 

607 

36,362 

901 

4,596 

1,221,730 

741,705,946 

93,139,022,225 

519,079 

37 

14,556 

48,861 

33.626 

489,445,198 

12,256,939,647 

66,874 


307 

774 

48,463 

1,011 

5,160 

1,692,194 

1,309,899,165 

174,532,089,577 

829,476 

46 

17,997 

63,582 

39,752 

715,419.682 

21,923,213,536 

104,198 


Per cent. 
50.50 




27.51 




33.28 




12.22 




12.27 


Number of freight cars 


38.51 




76.61 




83.44 


Tons carried 1 mile per mile of line. 
Average number of passengers 
carried: 


59.80 
25.15 




23.64 


Per passenger locomotive 


30.13 

18.22 




46.17 




78.86 


Passengers carried 1 mile per mile 


55.81 







IXCKEASED COST WAGES. 

It is claimed by railroad representatives that the economies 
effected by changes in traffic conditions have been in part offset 
by advances in the cost of materials and wages during the 
period covered. Advances in the cost of the materials can not 
be determined in the present state of public information as to 
railway expenditures. 

My authority for that statement is the reports of the Inter- 
state Commerce Commission, in which they state that they 
have been unable to obtain from the railroad companies under 
the present law such information as to permit them to place 
before the public the exact conditions with respect to operating 
expenses. 

The railway reports of the Interstate Commerce Commission 
purport to give the amounts expended for labor employed in 
railway operation, and from such reports it appears that the 
total amount paid as wages and salaries bv railroads in- 
creased from $465,601,581 in 1897 to $817,598,810 in 1904, 
or about 75 per cent. Railroad representatives frequen1?ry cite 
this statement as going to show an enormous increase in the 
wages paid to railway employees, and without further explana- 
tion allowing it to be inferred that it represents a large increase 
in the rate of wages. The fact is that tne increase in this total 
reported expenditure for wages and salaries is less than the 
proportion of increase in the total traffic handled, and the in- 
crease in the average wage per employee is less than the in- 
crease in the average traffic per employee. 
6922 



95 



If the total compensation and the number of employees re- 
ported for the two years, respectively, be a reliable basis for com- 
putation, the average yearly earning per employee in 1897 was 
$565.28, and in 1904 $630.80, or an increase of about 11.5 per 
cent. But, according to the reports, the increase for the same 
period in the average amount of traffic handled per employee is 
12.2 per cent. Therefore any advance in the rate of wages paid 
was more than offset by the increased service per employee. 

While it is true that a higher rate of increase is reported in 
the average daily wages for some classes of employees, in other 
classes the rate of increase is very much less than the above 
figure. Thus, in four classes, aggregating about 250,000 em- 
ployees, the increase is less than 5 per cent, and on only a few 
classes does the increase exceed 15 per cent. It would appear, 
therefore, that the above computed average increase in yearly 
earnings substantially agrees with the increase in the daily. 
wages as reported, and, further, that the increase in the rate 
of wages on either basis is not greater than the increase in the 
average traffic handled per employee. 

Compensation for services — Statistics of increase in wages and salaries 
paid oy railroads, from the statistics of the Interstate Commerce 
Commission, yeqrs ending June 30, 1897 and 1901f. 
Total compensation reported : 

1897 $465, 601, 581 

1904 $817, 598, 810 

Increase : 

Amount ^ $351, 997, 229 

Per cent . 75.61 



Average amount of compensation 
ployee : 

1897 

1904 



reported to each em- 



$565. 28 
$630. 80 



Increase : 

Amount 

Per cent 

Comparative summary of average daily compensation of railway em- 
ployees for the years ending June 30, 1897, and June 30, 190J h 



$65. 52 
11. 5 



Class. 


Average daily 
compensa- 
tion. 


Increase. 


Number 
of employ- 
ees in each 

class in 
1904. 




1897. 


1904. 


Amount. 


Per cent. 


General officers 


$9.54 
5.12 
2.18 
1.73 
1.62 
3.65 
2.05 
3.07 
1.90 
2.23 
2.01 
1.71 
1.70 
1.16 
1.72 
1.90 

1.86 
1.64 


$11.61 
6.07 
2.22 
1.93 
1.69 
4.10 
2.35 
3.50 
2.27 
2.61 
2.26 
1.91 
1.78 
1.33 
1.77 
2.15 

2.17 

1.82 


$2.07 
.95 
.04 
.20 
.07 
.45 
.30 
.43 
.37 
.39 
.25 
.20 
.08 
.17 
.05 
.25 

.31 
.18 


20.8 
18.6 

1.8 
11.6 

4.3 
12.3 
14.3 
14.0 
19.5 
17.0 
12.4 
11.7 

4.7 
14.6 

2.9 
13.2 

16.7 
11.0 


5.165 


Other officers.. 


5,375 


General office clerks 


46,037 


Station agents 


34,918 


Other stationmen 


120,002 


Enginemen 


52,451 


Firemen 


55,004 


Conductors 


39,645 


Other trainmen 


106,734 


Machinists 


46,272 


Carpenters 


53,646 


Other shopmen 


159,472 


Section foremen 


37,609 


Other trackmen 


289,044 


Switch tenders, etc ..- 


46,262 


Telegraph operators, etc 

Employees— account floating 
equipment 


30,425 
7,495 


All others and laborers 


160,565 


Total 


1,296,121 















6922 



96 

From the foregoing consideration it is evident that the aver- 
age rate of wages paid was not increased from 1897 to 1904 
more than 12 per cent. Surely this is true if the increase in 
officers' salaries is not included. The apparent increase in the 
average amount of traffic handled per employee was 12 per cent ; 
the real increase in the amount of traffic handled per employee 
was much greater than 12 per cent. This fact is made evident 
by the following considerations : 

1. The average traffic per employee is computed by dividing 
the total traffic by the total number of employees. 

2. If the number of employees reported be greater than the 
number actually employed in railway operation, this computed 
average traffic handled per employee will be proportionately 
understated. 

3. The total number of employees reported for 1904 greatly 
exceeds the number actually employed in handling the traffic, 
because there are included in the number so reported thousands 
of employees engaged in the construction of betterments and 
additions to the property, but charged to opcrat'mg expenses. 

While there were probably some employees engaged in the 
construction of betterments charged to operating in 1897, the 
number was very small, as compared with 1904. It is chiefly 
in times of great prosperity that railway improvements are made 
out of earnings and charged to operating expenses. Later I 
shall give instances of millions of expenditures made in this 
manner in the last few years. 

In addition to this well-known fact, there is evidence in the 
railway reports indicating a large increase in the numbers of 
employees engaged in improvements and charged to operating 
expenses. 

Railway employees whose compensation is charged to operat- 
ing expenses are classified, exclusive of general administrative 
employees, under the following departments : Maintenance of 
Way and Structures; Maintenance of Equipment; Conducting 
Transportation. 

With the great increase in the volume of traffic, we should 
expect a considerable increase in the number of persons required 
in the conduct of transportation. There would also be an 
increase in the number of persons required to maintain the 
condition and efficiency of way and equipment, though these 
departments would be less directly affected by the increase in 
traffic than would the transportation department. On the other 
hand, employees engaged on improvements charged to operating 
expenses would naturally be reported in the maintenance 
department. If the number of employees improperly charged 
in this manner was large enough it might result in a greater 
increase in the number employed in the maintenance depart- 
ments. This is precisely what the reports show. 

The number of persons employed in conducting transportation 
increased as a consequence of increased traffic only 50 per cent. 
But the number of employees in maintenance departments 
increased 67 per cent, as a result not only of increased traffic, 
but on account of improvements and betterments made. Of 
course, this increase affects the increase in the total number of 
employees and results in an improper reduction in the average 
traffic per employee. 
6922 



97 



Assume that the increase in the number of employees properly 
chargeable to maintenance should be as great as the increase 
in conducting transportation — say 50 per cent. Then all over 
50 per cent are improperly charged, and should he deducted. 
When figured out, this difference amounts to nearly 70.000 em- 
ployees. And it is evident that at least this number of the em- 
ployees charged as engaged in operating the railways are actu- 
ally engaged on improvements and additions to the property. 

If this correction and reduction be made in the number of 
employees reported, and a new computation made of the average 
traffic per employee, the result shows that the average traffic 
per employee, in 1904, instead of being 1,011 tons, was, at 
least 1,067 tons, or an increase over the average for 1897 of 
18.4 per cent — an increase in the traffic handled per employee 
more than one-half greater than the increase in the rate of 
wages per employee. In the face of this fact it is idle for rail- 
way representatives to contend that the increases that have been 
made in wages in any degree justify the advances in freight 
charges. Whatever the amount of such increases in wages may 
have been, it is a perfectly safe conclusion that they have been 
entirely provided for by the increase in the traffic handled. 
Persons emplaned, classified by department of service, 1897-190h 



Department of service. 


Total number 
employees. 




1897. 


1904. 




31,871 


48,746 






244,873 
160,667 


415,721 




261,819 








405,540 


677,540 






Conduct! ng transportation 

Unclassified 


378, 861 
7,704 


566,798 
3,073 







OVERCAPITALIZATION. 

Mr. President, the railroad is entitled to " just compensation " 
for its public services. 

Reasonable rates are held to be such rates as afford " just 
compensation." 

The Supreme Court has determined that reasonable rates 
affording " just compensation " are such rates as pay a fair 
return on a fair value of railway property. 

We shall settle nothing then, respecting reasonable rates and 
just compensation until we ascertain the fair value of the rail- 
road property of the country. 

The railroads are capitalized at $13,213,124,679 (1904). 

The public believes that this capitalization grossly exceeds 
the fair value of the property ; that it has been wrongfully 
" watered " and inflated ; and that the producers aud consum- 
ers of the country are unjustly taxed on transportation to pay 
an income upon a false and fradulent valuation. The railroads 
deny this claim. That makes a sharp and conflicting issue 
between the public and the railroads. 

I shall, therefore, present in this connection evidence of the 
over capitalization, inflation, and " watering " of many of the 
railroad properties of the country. I shall ,fo into the subject 
6922 7 



98 

fully enough to impeach the standing capitalization of the rail- 
road property of the country. I shall present such an array of 
facts as shall enforce the public demand for an accurate valua- 
tion of the railroad property of the country. 

The falsity of any representation which speaks of railway 
capitalization as " railway investment " becomes readily ap- 
parent when a few instances are cited to show the nature and 
source of capitalization of some of our leading railroads. Only 
a few days ago the case of the Wilmington and Delton, a North 
Carolina railroad was cited here. This road was originally 
capitalized on such a basis that its stock afterwards sold at $40 
per share. The earnings were forced up, however, and when the 
road became important it was merged into the Atlantic Coast 
Line and $400 of new stock issued for every $100 of the old 
stock, which bad in past years been selling at $40 per share. 

Probably everyone is familiar with the history of the making 
of millions of Erie stock by Daniel Drew, the treasurer of the 
road, to pay a gambling debt. He had sold short to Vander- 
bilt. who was trying to get entire control of the road, and when 
Drew found that Vanderbilt had cornered all the stock in 
sight he got a pointing press and made enough more Erie stock 
to satisfy his obligation. And this generation is asked to fix 
transportation charges high enough to pay interest and divi- 
dends on railroad securities created in this manner. 

An examination of financial newspaper files will show regu- 
larly, advertisements of reorganization committees announcing 
about as follows : 

The reorganization committee will issue $1,000 of new 6 per cent 
bonds ; $1,000 of 6 per cent preferred stock, and $1,000 of new common 
stock in exchange for each $1,000 of 6 per cent old 



Some interesting evidence on this question was given before 
the Cullom committee in 1886. Mr. O'Donnell, of the New 
York State Railroad Commission, called attention to the wa- 
tered capitalization of the Erie Railroad in the following 
language : 

They increased their capital one year over $30,000,000, and the rea- 
son they gave was that they had to lay down steel rails. In the ver- 
nacular of the newspapers at that time they spelled steel rails 
" s-t-e-a-1." 

Mr. H. V. Poor, the author of " Poor's Manual " of railroads, 
in his statement before the Cullom committee, 1886, pointed out 
that the most of this fictitious capitalization has been issued in 
defiance of law and in violation of charter provisions. He says,. 
in part: 

The reasons for such provisions are obvious. Railroads have vir- 
tually the power of taxing the people. * * * The object of such 
provisions is to limit this power of taxation to a fair return on the 
capital actually invested. The common way in which such a wholesome 
provision of the law is avoided is by contracts for construction in which 
the promoters of the railroad to be built are really the contractors, re- 
ceiving a gross amount of stocks and bonds, twice or thrice greater, per- 
haps, than the cash cost of the road. 

As illustrations of such fictitious capitalization Mr. Poor cited 
the Pacific roads chartered by Congress. In the act chartering 
the several companies it was provided that the share capital 
should be subscribed for bona fide, and that the full nominal 
value of the same should be paid in in cash. 

A Congressional investigation of the Union Pacific showed 
that the stock of the company was issued chiefly to the directors. 
6922 



99 

of the road under a contract for construction without consid- 
eration. The committee reported to the House that the issue 
of this stock in violatton of law justified the abrogation of the 
company's charter. It was not abrogated. 

The Northern Pacific Company, under like charter restric- 
tions, divided the whole nominal amount of $100,000,000 of its 
capital stock among the promoters of the enterprise, little or 
nothing being paid thereon, before any considerable expenditure 
was made on the road. 

The Central Pacific was likewise constructed by its promoters, 
and the greater part of the stock issued went to them as a 
gratuity. 

The water in the Erie was described by Mr. Poor as the dif- 
ference between the par value of $55,000,000 of bonds ($1,000 
each) and the price, $350 each, at which they were sold, or in 
all about $36,000,000. 

The New York Central secured a special act of the New York 
legislature which allowed some $48,000,000 of water to be added 
to the 'capitalization of that property, in violation of statutory 
and charter provisions. The promoters of the New York, West 
Shore and Buffalo Railroad divided the $40,000,000 capital stock 
of that company as a part merely of their profits to be received 
under a construction contract. 

The greater part of the share capital, $50,000,000, of the New 
York, Chicago and St. Louis Railroad was issued in like manner 
as a profit to the promoters. 

Says Mr. Poor : 

Another mode of issuing " water " was that adopted by the East 
Tennessee, Virginia and Georgia Company, which, without the payment 
of anv considerable sum into the treasury, increased its share capital 
from $1,900,000 to $44,000,000, the occasion of the increase being the 
purchase of or consolidation with some other line. 

Previously, in his Manual for 1884, Mr. Poor had given care- 
ful attention to this question, and as a result of his investiga- 
tions stated that the true investment in our railroads did not 
exceed the amount of the bonded indebtedness. In a subse- 
quent estimate, before the Cullom committee, Mr. Poor some- 
what reduced the proportion of the fictitious capitalization in 
the foregoing statement, but he was particular to state that in 
this later estimate no allowance was made for the enormous 
amount of water in the bonds. 

In the course of his statement Mr. Poor quoted Mr. Charles 
Francis Adams, writing in 1869 of the capitalization of the 
Union Pacific Railroad. The statement is all the more interest- 
ing in that Mr. Adams later, and* at the time of Mr. Poor's 
statement, was president of the road. Mr. Adams said : 

The line from Chicago to New York represents now but $60,000 to 
the mile, as the result of many years of inflation, while the line between 
Omaha and San Francisco begins life with a cost of $115,000 per mile. 
It would be safe to say that this road cost considerably less than one- 
half of this sum. The difference is the price paid for every vicious 
element of railroad construction and management. Costly construc- 
tion, entailing future taxation on freight ; tens of millions of fictitious 
capital ; a road built on the sale of its bonds and with the aid of sub- 
sidies ; every element of real outlay recklessly exaggerated, and the 
whole of it some future day to make itself felt as a burden on the trade 
which it is to create. 

By exacting earnings from the public on the basis of this ficti- 
tious capitalization, Mr. Poor says : 

The Union Pacific and the Central Pacific together divided or car- 
ried to the credit of profit and loss over $100,000,000 over and above a 



100 

fair return upon the capital invested in them. The water in the New 
York Central equaled $48, 000,000 or thereabouts. Upon this sura divi- 
dends at the rate of 8 per cent were paid for fifteen years, the water 
and the dividends on the same equaling over $100,000,000. 

Mr. Thurber, a New York wholesaler, who testified before the 
Cnllom committee, criticised Mr. Poor's estimate of railroad fic- 
titious capital in this language: 

I know there are so many instances where that is so very much short 
of the mark that it is absurd. I think he said the New York Central 
was about half water. Why, the New York Central had been watered 
three times prior to 1867-68, and at that time they doubled it. They 
put forty-seven millions of water into the New York Central and Hud- 
son River Railroad in 1867-68, and they paid 8 per cent dividends on 
that forty-seven millions until last year (1885). I think last year they 
paid 6 per cent. 

Mr. Thurber submitted as an example of " how excessive capi- 
talization operates as a mortgage upon the industry of the coun- 
try " a computation of the amount of these dividends, with 
interest, over the period of fifteen years, which aggregated over 
$100,000,000. 

In the statement of Mr. Simon Sterne, who testified before 
the Cullom committee as the representative of the Board of 
Trade and Transportation of New York, we obtain some inter- 
esting information as to the manner in which these stock issues 
and some other questionable items find their way into the con- 
struction accounts of the railways. 

I shall presently show how the whole system of railway ac- 
counting has been built up with a view of concealing these 
transactions and of concealing the earnings of the railways from 
year to year up to the present time. Sir, I should not care to 
trespass upon the time of the Senate to present the facts of the 
false and fraudulent capitalization of the railroads of these 
earlier years, except that the villainous system still survives. 
The methods of Gould, and Fiske, and Yanderbilt, and Hunting- 
ton are the methods of Morgan, and Rockefeller, and Hill, and 
Harriman. It is the same old game. The stakes are bigger 
now. The system of accounts and. the other details are much 
more adroit and clever. 

As an example, Mr. Sterne cites the expenditure one year by 
the Erie of $700,000 as a corruption fund and for legal expenses, 
which was carried to the " india-rubber account " and charged 
to the cost of construction. After the capital of the New York 
Central was doubled in 1869 they had a stock account, " which," 
says Mr. Sterne, " was out of all harmony with their construc- 
tion account, and, for ten years following, every year varying, 
from 3 to 8 per cent of this water was artificially carried into 
the construction account, and the capital account balanced. 
* * * In the same way the balances were forced in the Erie 
Railway Company when Mr. Gould took $40,000,000 of stock of 
the Erie Railway Company, out of its books, and sold it on the 
street, and appropriated the money to his own use, and there 
was not a dollar's worth of construction to represent it; and 
when reorganization took place the balance of the Erie Railway 
Company was forced to meet that violence done to the stock 
account." 

Is it to be supposed that the people of this country will consent 
to be taxed to the end of time upon capitalization of that sort? 

In the final report of the Industrial Commission, is cited 
the purchase of the Chicago and Alton Railway, in 1899. The 

6922 



101 

road had been capitalized at $30,000,000. The purchasing syn- 
dicate issued in the purchase a total capitalization of $94,000,000. 

Another case cited is that of the St. Paul and Manitoba Com- 
pany (Great Northern Company, Lessor). The property of this 
company had previously been bought at foreclosure at $3,600,000, 
and some years later the capitalization reached $84,550,000. In 
the Great Northern rate case of the Minnesota commission, the 
Minnesota court made an appraisal of this property to determine 
the reasonableness of rates, and held that the cost of reproduc- 
tion of all property of the company at that time, 189G, could 
not exceed $44,000,000. 

The Interstate Commerce Commission, in its decision in the 
Danville case, said of the $120,000,000 of common stock of the 
Southern Railway: 

This common stock was issued as a part of a reorganization scheme, 
under which the Southern Railway Company came into existence. 
It does not appear that the persons to whom this stock was originally 
issued ever paid one dollar in actual value for it. It simply appears 
that the stock is outstanding. 

In like manner, the capital of the Atlantic Coast Line was 
increased $50,000,000 without any additional investment, merely 
to enable Mr. Morgan to get the control of the Louisville and 
Nashville from Mr. Gates, whom he considered not a " proper 
person " to control the destinies of that road. 

Mr. James J. Hill testified, in an investigation of the Northern 
Securities merger by the Interstate Commerce Commission, 
that in the purchase of $108,000,000 of Burlington stock by the 
Great Northern and Northern Pacific Companies, $216,000,000 
new 4 per cent bonds were issued and that the purchasing com- 
panies which guaranteed the interest on these bonds, intended 
to make the property earn not only enough to pay 4 per cent on 
this doubled capitalization, but a dividend on the old stock as 
well. Mr. Hill further testified that in the merger there were 
issued on the capital of the Northern Pacific $22,500,000, and on 
that of the Great Northern $39,500,000, or a total of $62,000,000 
of securities in excess of the old capital. 

In the recapitalization of the Rock Island $75,000,000 Rock 
Island stock was converted into $75,000,000 of bonds and 
$137,000,000 new stock. 

Current financial journals are discussing a proposed new issue 
of one hundred million dollars of New York Central stock. 

The Senator from South Carolina presented here a few days 
ago a letter from a competent engineer estimating the cost of 
railway construction. As a basis for this estimate, the rail- 
roads of Massachusetts were selected, because of the more effi- 
cient railway regulation of that State, and because the condi- 
tions there require relatively large investment for equipment. 

After making most liberal allowances for equipment and 
architectural work, and adding to the average standard costs of 
construction, the engineer arrived at an average cost per mile 
of $25,200, which, he said : " I have no doubt substantially ex- 
ceeds the true costs of railways." On the same mileage the 
roads of the State are capitalized at $52,000 per mile — " 51J 
per cent water, probably more." 

The writer gives as his conclusion, after thirty-four years of 
experience and investigation, "that, outside of Massachusetts," 
* * * " the equipment rarely costs as much as $5,000 per 
mile, and we are liberal in putting the cash cost of construction 
and equipment of all roads at an average of $20,000 per mile," 
G92:> 



102 

making about five billion six hundred million dollars for the 
investment in all the roads of the country, in 1903, and leaving 
the seven billion additional capital to represent water. Every 
example of extraordinary cost of construction that may be cited 
Is more than offset by hundreds of miles of railway which have 
been built at a cost inuch less than $17,500 per mile. 

To quote directly from the language of Engineer Marks on the 
cost of construction — 

You may, and probably will, have many instances of extraordinary cost 
of construction brought to prove to you the higher cost of our railways. 
Many of these instances are both unwise and unnecessary expenditures. 

Do not forget that for every such case there are hundreds of miles of 
railway which honestly have not cost §17,500 per mile to construct and 
equip ; on the contrary, very much less. 

The most comprehensive statement of the fictitious capitaliza- 
tion of the American railroads, and the most extensive inves- 
tigation of thys question of " water," are probably embodied in 
the work of Mr. Van Oss, of London, entitled. "American Rail- 
roads as Investments," published in 1893. While the infor- 
mation here presented is for the benefit of investors primarily, 
the facts are equally valuable for our purpose. The conclu- 
sions are all the more reliable in consideration of the fact that" 
they are offered largely in commendation of our railway se- 
curities as investments, and are not open to such criticism of 
radicalism as are usually made, by railway interests, in answer 
to statements of this kind. I wish to say that Mr. Van Oss is 
an investment banker of London. He is late editor of the In- 
vestor's Chronicle. He published, in 1892, "American Railroads 
as Investments;" in 1893, "American Railways and British In- 
vestors ; " in 1896, "A Decade of Finance." He has written and 
still writes articles for various leading reviews on the subject of 
finance and investments. The added fact that Mr. Van Oss's 
work is used extensively in the Final Report of the Industrial 
Commission, gives it a certain authoritative standing, and war- 
rants the extended consideration which I wish to give certain 
statements and conclusions and the adoption of its final results 
as the basis for computing an estimate of the actual investment 
represented by present railway capital. 

Mr. Van Oss classifies the different ways of inflating capital 
of American railways as follows: 

1. By fraudulent issues of bonds and shares as a downright 
swindle or for speculative purposes. 

2. By paying too much for construction. 

3. By purchasing property at excessive prices. 

4. By buying superfluous competing lines. 

5. By selling bonds and shares at a discount 

6. By declaring stock dividends. 

As an example of stock issued for speculative purposes the 
history of the Erie Railroad is cited. The capital of this road 
was increased between 1868 and 1872 "from $17,000,000 to 
$78,000,000, mainly to manipulate Wall Street." And Presi- 
dent Watson, " a few years later, doubled the funded debt, it is 
said, also chiefly for his own benefit." 

As an illustration of the construction company frauds, the 
incident of the South Pennsylvania Railroad is given. This 
road was started by Vanderbilt to compete with the Pennsyl- 
vania, and it was, says Mr. Van Oss, 

Eroven to have cost actually §6,500,000, and a responsible contractor 
ad offered to build it at that price. Yet a construction company, 



103 

composed of Vanderbilt's clerks, received $15,000,000 to complete it, and 
the syndicate of capitalists which supplied this money got $40,000,000 
In bonds and shares, so that for every dollar of actual cost over $6 of 
bonds and shares were issued. 

In the same manner, though not in the same proportion, the thing 
was worked all over the Union. * * * The builders of the Central 
Pacific, for instance, commenced with the modest sum of $159,000, and, 
taking this as a nucleus, they completed the road, gathering a capitali- 
zation of $139,000,000. * * * The Government commission on Pa- 
cific Railroads in its report to Congress says that $58,000,000 would 
have been a very good price for the railway. 

Of the extent to which was carried the practice of selling to 
railway companies property of officers and directors at excessive 
prices, in stocks and bonds, Mr. Van Oss says : 

Until twelve or fifteen years ago the majority of purchases of aux- 
iliary concerns used to be permeated with fraud. 

Parallel lines of railway were built to force their purchase 
at excessive prices, as a sort of blackmail, backed by the threat 
of competition. Such purchases added great amounts to the 
capitalization, but little or nothing to the earning power of the 
properties. Thus Vanderbilt was forced to lease the West Shore 
and buy the Nickle Plate, and the Pennsylvania, in turn, had 
to come to Vanderbilt's terms to preserve its monopoly from 
competition of the South Pennsylvania. 

To secure capital it was a common practice to allow liberal 
discounts on bonds, " and shares were frequently given into the 
bargain. * * * The railroads would have outgrown the 
payments of excessive rates for money if their affairs had other- 
wise been conducted with honesty and integrity." But they 
were not. Hence, " shares not being much sought after, it mat- 
tered little to the promoter whether he gave shares into the 
bargain or not." The majority of companies realized nothing 
for the shares they issued in their early days. The Missouri, 
Kansas and Texas Railway Company, for instance, gave 
$21,400,000 in shares to a construction company, in addition to 
the payment made in bonds. The New York Central, Erie, 
Reading, St. Paul, Chicago and Northwestern — in short, almost 
every railway company received nothing for the earlier issue 
of its ordinary shares. * * * Instances are given of ficti- 
tious capital resulting from the payment of stock dividends, as 
follows : 

In December, 1868, the New York Central distributed a stock 
dividend of 80 per cent, and eleven months later, when con- 
solidation with the Hudson River Railroad followed, a further 
stock dividend of 27 per cent was declared, while the Hudson 
River shareholders received one of 85 per cent. 

The Reading paid a script dividend of 10 per cent in 1846, one 
of 12 per cent in 1847, while between 1871 and 18T6, upon a 
capital of $32,200,000, more than half water, $15,700,000 was 
paid in dividends, mostly scrip. 

The Erie made still larger payments of stock dividends; the 
Chicago, Burlington and Quincy in 1888 paid 20 per cent, and the 
Santa Fe in 1881 paid 50 per cent. 

The practice — 
declares Mr. Van Oss — 

may be said to have been general, and is still resorted to in numerous 
cases. 

The aggregate amount of water in the five hundred million 
capitalization of the Central, Erie, and Reading companies is 
variously estimated from $200,000,000 to $300,000,000. 
6922 



104 

Poor's Manual for 1884 points out that the increase of capital- 
ization of American railways for the three years ending Decem- 
ber 30, 1883. was $2,093,000,000, or $70,000 per each mile of new 
road. Mr. Poor said : 

The cost of the mileage construction certainly did not exceed $30,000 
per mile. The whole increase of the share capital and a portion of the 
funded deht was in excess of the cost of construction. 

Referring to this statement of Mr. Poor, Mr. Van Oss says : 

Some writers even go so far as to allege that the estimate of Mr. 
Poor, whom they deem a spokesman of the railways, is moderate and 
conservative, and the fictitious capital is said hy some, among others 
by Mr. Hudson, to amount perhaps to fully two-thirds of the total 
capitalization. 

Some sound reasons are given by Mr. Van Oss why this view 
is not improbable. 

As a result of his investigation of American railway history 
and capitalization, Mr. Van Oss arrives at two important con- 
clusions : First, that the average amount originally received in 
actual value for American railway bonds probably did not 
exceed 67 per cent. Second, that the original investor in Amer- 
ican railway stocks certainly paid not more, on the average, 
than 10 per cent of their face value, and probably less. 

If an estimate of the actual investment on American railroads 
is computed on the basis of these final percentages given by Mr. 
Van Oss on the capitalization of 1904 as reported by the Inter- 
state Commerce Commission, we get the following result : 

Stock, 10 per cent of $6.339.899,329 $633, 989, 932 

Bonds, 67 per cent of $6.873,225,350 4,605,060,984 

Total investment represented by $13,213,- 

124.679, total capital 5,239,050,916 

or, in round numbers 5,000,000,000 

The remaining $8,000,000,000 odd are entirely fictitious capi- 
talization, and can not be considered in discussion of railway 
earnings. This gross estimate of cost equals $23,500 per mile 
of line and exceeds the average true value per mile of all the 
railroads of Michigan, Wisconsin, and Texas, as actually de- 
termined, and is substantially as high as the value placed on 
the roads of Massachusetts in the engineer's estimates before 
quoted. 

Now, Mr. President, if I am not overtaxing the patience of 
Senators, I wish to call attention to the methods by which these 
great and excessive earnings are concealed by the railroad com- 
panies of the country. 

BETTERMENTS AND SURPLUS OUT OF PROFITS. 

To understand the inadequacy of any dividend statement as 
an index to railway profits, it is only necessary to give attention 
to a few simple elementary facts. The railroads themselves 
report annually millions of net earnings in excess of the 
amounts distributed to bond and stock holders. Enormous sums 
are every year carried to surplus and devoted to additions, bet- 
terments, and improvements out of profits. A tabulation, show- 
ing such expenditures for additions to property out of profits, 
as stated in recent reports of some thirty-two of our leading rail- 
ways, is hereto appended. [Appendix B.] 

I need not pause to say that it is wholly wrong to tax trans- 
portation of the people of this country high enough to enable the 
railroad companies to pile up a great surplus and to make out of 
6922 



105 

their profits improvements and investments for which they 
should provide with new capital. In other words, they make the 
public furnish the new capital, and then make them pay interest 
and dividends upon it. Among the roads included, the Balti- 
more and Ohio, from 1899 to 1905, spent out of profits over 
$19,000,000 for improvements; the Delaware, Lackawanna and 
Western, 1901-1904, over $13,000,000; the Erie, 1902-1905, over 
$5,000,000; the New York Central, 1899-1904, over $9,000,000; 
the Pennsylvania, 1899-1904, over $50,000,000 ; the Chicago and 
Northwestern Railway, 1900-1905, over $20,000,000; the St. 
Paul, 1900-1905, nearly $10,000,000 ; the Omaha, 1899-1905, over 
$16,000,000; the Santa Fe, 1896-1904, $30,000,000; the Great 
Northern, 1898-1905, nearly $16,000,000; the Northern Pacific, 
1899-1905, about $20,000,000, and the Union Pacific, 1900-1905, 
over $13,000,000. 

Every one of these cases represents excessive taxation of trans- 
portation, which, under the Supreme Court decisions, is unlaw- 
ful. The railroad companies of the country have a right to tax 
transportation — and I remind the Senate of it again — only 
enough to pay operating expenses and give them a fair interest 
or return on the fair value of their property. This is the limit 
of their lawful profits, and again I remind the Senate that they 
take out of the people, the producers and consumers of this 
country, besides their legitimate profits, enough additional and 
unlawful profits to enable them to accumulate a great surplus. 
Out of this surplus they make extensive improvements and in- 
vestments, for which they should pay their own money. Then 
they " capitalize " these investments and improvements so 
wrongfully accumulated out of the profits on excessive rates, 
and, in turn, make this the basis for charging still higher rates. 
How much longer is the public to wait for Congress to act. 
while this process of capitalizing extortionate rates goes on? 
Is it to be expected that the country will patiently accept a 
bill that does not pretend to touch the source of this infamous 
wrong? 

It is true that these enormous profits do not go to the owners 
of railway securities directly as interest or dividends, but 
usually it is the practice of railway companies to capitalize 
these improvements, and to favor the stockholders in the dis- 
tribution of the new stock. These improvements add to the 
earning power of the roads. No further justification is offered 
by railway magnates for the issue of new capital than that the 
traffic and the earning power — that is, the traffic and the rates 
chargeable — can be made to pay interest and dividends on such 
capital. This was the justification offered by Mr. Hill for the 
$216,000,000 new railway capital issued in the so-called " pur- 
chase " of the Burlington by the Great Northern and Northern 
Pacific companies. Nothing is omitted to be done in the in- 
terest of railway promoters for the want of a pretext. An ex- 
ample is the case of the Chicago and Northwestern road. This 
road for several years has been making extensive improvements 
out of profits. From 1900 to 1905, inclusive, it has made such 
improvements to the amount of $26,500,000. In 1903, $36,000,000 
of common stock was issued to buy the " franchises," etc., of the 
Fremont, Elkhorn and Missouri Vallfey Railroad Company, of 
which company the Northwestern already owned all the stock ; 
in other words, the complete title to the road, franchises, and 
all, excepting such mortgages as were a lien on the property. 
6922 



106 

When such stock is sold to stockholders of the company issu- 
ing it, usually it is sold at about half its value in the market. 
The favored purchasers may then turn around and sell it to 
" investors " at the market price. The investors, in turn, expect 
the value of the new stock to be maintained by the payment 
of dividends to be earned by charging the public as much as 
the traffic will bear. 

The relation between return on railway securities and the 
rates charged is very clearly set forth in the London Statist. 
In an article in June, 1904, urging advantages of American rail- 
way securities, the following language is used: 

In recent years there have been few new railroads constructed, and 
the density of traffic has grown very rapidly. Hence rates have been 
restored (i. e., to the basis enforced preceding the competitive period 
of previous years) and with but unimportant exceptions have been firmly 
maintained. These conditions, moreover, appear likely to be permanent. 

TRUE RAILROAD PROFITS NOT KNOWN. 

It is a common practice with our railroads in their financial 
reports, by improper charges to operating expenses, to grossly 
understate their net earning. Nowhere is there any public in- 
formation that will furnish a basis for a true determination of 
the true profits of railroads. Respecting this situation, the In- 
terstate Commerce Commission, in its report for 1903, has the 
following statement: 

In order to determine whether railroad charges are reasonable or 
unreasonable, it is necessary to know what measure of profit the car- 
rier is deriving from the rate imposed and what amount of money is 
received and in what way it is expended. It makes a wide difference 
whether the revenues of the carrier are used up in necessary cost of 
operation or are employed in adding to the permanent value of its 
property. 

Of the reports furnished by the carriers, the Commission 
adds: 

If carriers do not make report or fail to make full report no penalty 
is provided. As a result certain railways have habitually refused to 
state what permanent improvements are charged to operating expenses. 
Others, while professing to distinguish, evidently do not. The result 
is that the net earnings given in our statistical report do not show the 
actual net earnings of our railways as a whole, and this is especially 
so of the last few years, during which most improvements have been 
made. 

This criticism is true generally of all figures and reports fur- 
nished by the railroads. 

Notwithstanding all the economies resulting from changes in 
traffic conditions, the ratio of operating expenses to gross earn- 
ings has been maintained in the reports. In 1897 the operating 
ratio stood at 67.06 per cent, and in 1904 at 67.79. The manner 
in which this is accomplished is indicated in the notations to 
Mr. Floyd W. Mundy's Investor's Manual for 1906, " The Earn- 
ing Power of Railroads." In these notes you will read of the 
Delaware and Hudson : " For years a large amount " expended 
for improvements has been charged to operating expenses ; of the 
Northern Central Railway Company that : " Operating expenses 
have for years been liberally charged for betterments;" of the 
Pennsylvania that : " Operating expenses have for years been 
heavily charged for improvements ; " of the Southern Pacific 
that from 1905 operating expenses were charged with the cost 
of renewing with heavy steel rails twenty-seven hundred miles 
of line ; and you will read that the Michigan Central " has for 
years adjusted its expenses to its earnings," i. e., charged better- 
ments to operating expenses to whatever amount was necessary 
to maintain a constant operating ratio. 
6922 



107 



Sometimes partial statements of such improper charges to 
operating expenses are given in footnotes in reports to stock- 
holders. Financial writers, who make a study of these mat- 
ters upon careful analysis of such reports, are able to estimate 
partly the amount of such charges. In Mr. Mundy's manual, 
" The Earning Power of Railways," for 1906 are given in notes 
at the back of the book such statements for a number of com- 
panies. Some of these instances are set down in the following 
table : 

Table showing instances of expenditures for improvements and additions 
to property charged to operating expenses. 

[Mundy, "Earning Tower of Railroads," notes.] 



Name. 



Central Vermont Railway 

Maine Central Railway 1 

New York, New Haven and Hartford Railroad 

Delaware, Lackawanna and "Western 

Erie Railroad 

Lehigh Valley 

New York Central and Hudson River 

Ann Arbor Railroad 

Lake Shore and Michigan Southern 

Louisville and Nashville 

Nashville, Chattanooga and St. Louis 



Years. Amounts. 



1899-1905 
1901-1905 
1901-1903 
1902-1904 
1900-1902 

1902 
1902-1904 
1893-1904 
1902-1904 
1895-1905 
1900-1905 



$1,398,236 
2,211,727 
7,697,340 
4,826,366 
3,588,437 
1,676,974 
8,553,970 
2,766,236 
16,064,973 
12,913,557 
3,741,401 



In England the practice of charging betterments to operating 
expenses, which prevails here, is unknown. English financial 
writers find it necessary for the information of foreign investors 
to correct the reported net earnings of the American railways by 
the addition thereto of the amount of such improper charge against 
operating. In analyzing the profits of a few of our leading rail- 
ways, the London Statist, in 1904, had a tabulation showing 
net earnings corrected in this manner. Such corrections made 
in the reported net earnings of nine roads for the year 1903 
amounted to $21,263,000 on a total reported net earning of 
$135,367,000. The correction on these nine roads taken together 
amounted to 16 per cent of the total net earnings reported. The 
details are set forth in the following table : 

London Statist corrections of reported net earnings of nine American 
railways for the fiscal year 1903. 



[Statist, London, 1904.] 




Company. 


Net income, 
1902-3. 


Add better- 
ment out- 
lays charged 
to expenses. 


Net income 
corrected. 


Chicago, Milwaukee and St. Paul 

Denver 


$18,045,000 
6,885,000 
22,651,000 
10,354,000 
12,601,000 
29,419,000 
15,946,000 
13,763,000 
5,793,000 


$2,333,000 
120,000 
1,443,000 
6,315,000 
2,006,000 
3,256,000 
2,196,000 
2,500,000 
1,100,000 


$20,378,000 
7,005,000 


Great Northern 


24,004,000 


Lake Shore a 


16,669,000 


Louisville and Nashville 


14,601,000 


The New York Central 


32,675,000 


Reading 


18,142,000 


Southern 


16,263,000 


"Wabash 


6,893,000 






Total 


135,367,000 


21,263,000 


156,630,000 







"Year ending Dec. 31, 1903. 



6922 



108 

PRESENT RAILWAY PROFITS GROSSLY EXCESSIVE. 

It becomes desirable in tbis discussion to estimate, as best we 
may. in some measure tbe amount to which railway charges are, 
on tbe whole, excessive. If railway interests have any com- 
plaint to make against any such estimates as are offered, it 
should be remembered that it is the railways themselves who, 
1#- their practice of manipulating railway accounts and statis- 
tics and by their issues of billions of watered capital, make it 
necessary that this discussion proceed upon the unsatisfactory 
basis of mere general estimates instead of exact knowledge 
which the public has a right to have. These are public-service 
corporations. If it be true that the public should pay trans- 
portation charges to yield a fair profit on a fair value, then the 
public is entitled to know not only the value of railway prop- 
erty, but the exact cost of operation and every other fact per- 
taining to the conduct of the business which in every way bears 
upon the cost or the character of the service. 

Transportation and transportation charges affect the daily 
life of every man who must support a family in this country. 
The head of the household is the freight payer in the United 
States. From the time he begins to have any responsibility 
in the maintenance of a family he must pay freight on every 
single article that enters into the economy of the household or 
the material life of the family. 

I do not expect that an estimate of the actual investment in 
railways, as computed on the basis of Mr. Van Oss's investiga- 
tions will pass without criticism. But the comprehensive and 
thorough character of the investigations certainly entitle his con- 
clusions to respectful consideration. I believe that they are fair 
and conservative. In any computation of reasonable railway 
profits, based upon this estimated value, it should be kept in 
mind that no deduction is made for that part of the value of our 
railway which was donated by the public. 

Mr. President, when so much sympathy is expressed for 
" innocent purchasers " of watered stocks and bonds, I think it 
is worth while for the Senate, for the Congress, and for the 
country to consider the vast amounts of money that have been 
given by private donation, by State appropriation through mu- 
nicipal bonds, by State donation through land grants, and by 
lavish donations through land grants made by the Federal Gov- 
ernment. These enormous contributions by the innocent public 
add another argument demanding that the interests of the gen- 
eral public shall be the first and paramount consideration in 
tbis legislation. 

The total amount of such donations is variously estimated as 
high as $2,000,000,000. Furthermore, any computation of rail- 
way profits must, for want of better information, accept as a 
basis of railway profits the net earnings as reported by the com- 
pany. Such net earnings are very much understated, probably 
to the extent of 15 per cent of the total net earnings reported. 

If there is a disposition to contend that railway capital issued 
subsequent to Mr. Van Oss's report represents a larger propor- 
tion of actual investment than determined by him at that time,. 
I ask that the above facts be given consideration. It is not 
admitted that later issues of capital represent more real invest- 
ment : but if this be so. the error in our conclusions which this 
may tend to produce will be fully offset by the inclusion of the 
6922 



109 

enormous amounts of railway value which have been literally 
given by the public, and the acceptance of the understated net 
earnings of the railways as a basis of computing their profits. 
Finally, I wish to call attention to the fact that an estimate of 
$5,000,000,000 as the actual value of American railways is 
equal to $23,500 per mile on the mileage of 1904. This is more 
than the average value per mile for all the roads, the value of 
which has been actually determined by the States of Mich if/an. 
Wisconsin, and Texas. With a knowledge of the roads of Mich- 
igan and Wisconsin, I do not hesitate to say that they fairly 
represent the average cost of the roads of the country. 

The total net earnings of the railways of this country as re- 
ported for 1904 amounted to $085,205,467. This net earning 
equals an annual return of 13.7 per cent on a total investment 
of $5,000,000,000. Money is seeking investment to-day where 
the security is adequate for a return of 4 per cent and even 
less. I believe that under an efficient Government control 
there would be no place where honest investment would be 
more secure than in the railroad development of this country. 

If 4 per cent is a fair rate of earning, the railroads of this 
country are charging annually at least $485,000,000 more for 
transportation than is a fair return upon their investment and 
a just compensation for the services rendered. This amount is 
nearly 25 per cent of their total gross charges. It amounts to 
$6.06 per capita for every inhabitant of the country, or $38.50 
for each family. 

If 5 per cent is a fair rate, the roads are charging annually 
at least $435,000,000 more than is fair and reasonable, or an 
amount equal to 22.7 per cent of their total gross charges — 
$5.43 per capita, or over $25 per family. 

If 6 per cent is a fair rate, the carriers are exacting annually 
at least $385,000,000 more than is fairly reasonable, or nearly 
20 per cent of their total gross charges. In other words, on 
this rate of profit the gross charges are practically 25 per cent 
in excess of just and reasonable charges. This excess amounts 
to $4.81 per capita, and $22.60 for each head of the family. 

If the carriers are entitled to earn 8 per cent, they are now 
overcharging by at least $285,000,000 annually. This is an 
annual tax upon the people over and above any possible fair 
or reasonable charge for the service rendered amounting to 
over $3.65 per capita, or about $17 for every head of a family 
in the United States. 

These rough estimates are not submitted as final statements, 
but are subject to revision in the light of additional informa- 
tion, but no hesitancy is felt in expressing confidence that an 
exact knowledge of the facts involved will require a revision of 
these estimates to show a larger measure of extortion than is 
here suggested. It is not the purpose of these figures to pre- 
sent a measure of this extortion so much as to make clear the 
conditions which demand that a true and actual measure of 
such extortion shall be determined, and finally to demand that 
power be lodged in some competent and disinterested tribunal 
to correct it. 

PUBLIC AID TO RAILWAY CONSTRUCTION. 

We sometimes hear it stated that the cost of reproduction of 
railway property would not fully and fairly represent the ac- 
tual investment. On the contrary, present values, as repre- 
6922 



110 

sentcd by the cost of reproduction, or almost any other measure 
by which the roads may be valued, would be more, by hundreds 
of millions of dollars, than the actual investment in the prop- 
erty on which the stocks and bonds were based. A large part 
(estimated as high as two billions of dollars) of the actual 
investment, which was about five billions, was not furnished by 
the owners of the railroads, but was furnished by the public. 
These donations were in the form of enormous land grants, of 
State and Federal subsidies of cash and credit, rights of way, 
cash bonuses by towns and counties, and subscriptions to the 
capital stock. 

Frequently we hear it urged that railroad owners should be 
allowed a profit on more than the actual investment, because of 
the risk which they assume in constructing the road. The con- 
tention is unsound, because in the majority of cases, the. rail- 
road builders did not assume this risk. In recent railway con- 
struction there is practically no considerable risk. In the 
earlier period of construction, and to a less degree in the later, 
substantially all the risk involved was assumed by the commu- 
nity in which the roads are built. 

The amount of land granted by State and Federal govern- 
ments in the aid of railways is expressed only by figures so 
large as to be totally incomprehensible. In twenty years prior 
to 1871 the Federal Government granted in aid of railway con- 
struction 155.000,000 acres of land. Several States granted, in 
addition to this amount, a sum sufficient to equal about 200,- 
000,000 acres of land. While a considerable amount of the 
Federal grants were forfeited, the railways have received from 
this source about 100.000.000 acres, and will receive many mil- 
lions more. The amount actually received from the State and 
National governments will aggregate an area equal to five States 
the size of Pennsylvania. 

In addition to these enormous land grants many millions of 
dollars in national and State bonds were issued in the aid of 
railway construction. The United States Government issued to 
the Pacific road Federal bonds to the amount of $16,000 a mile 
to the base of the Rocky Mountains and $48,000 to $32,000 per 
mile through the mountains to the Pacific coast. This loan was 
secured to the Government by a second mortgage on the road, 
which was subject to a prior mortgage for a like amount per 
mile. In this manner the Federal Government loaned to the 
Union Pacific, the Central Pacific, the Western Pacific, the Kan- 
sas Pacific, and two smaller companies about $05,000,000. This 
does not include the interest on the bonds, which for years was 
paid by the Government, and which was never fully repaid. 

Several of the States made grants of many millions of dollars 
in similar manner. The State of Missouri spent thirty-two 
millions, of which it never recovered but six. Tennessee spent 
thirty millions. Half of the States in the construction period 
increased their bonded debts for the aid of railways. Among 
the larger contributors were Illinois, Indiana, Michigan, Georgia, 
Tennessee, North Carolina, South Carolina, Missouri, Virginia, 
and Louisiana. 

Counties and municipalities issued their bonds in like manner. 

The census of 1870 shows that there were still outstanding in 

county bonds issued in the aid of railway construction not less 

than $185,000,000. In New York State alone county and mu- 

6922 



Ill 

nicipal aid amounted in 1870 to no less than thirty millions. 
And in Illinois, in 1873, it was determined that there had been 
spent $20,000,000 .in this manner. This practice was common 
throughout the country. 

As a general rule, the programme in railway construction was 
for the community to assume the first and greatest risk. In 
his History of the Chicago, Milwaukee and St. Paul Railway 
Company, John W. Cary, for thirty years general counsel of that 
company, says of the projectors of the first line of that great 
system : 

There were many active, energetic men ready to engage in the work, 
but without money. 

When these " active, energetic men " had secured a charter ; 
when they had secured Federal, State, or municipal aid; when 
the terminal city had loaned the company its credit in city 
bonds ; when right of way and depot grounds had been donated 
to the company ; when the towns along the right of way had 
put up bonuses ; when the farmers had made subscriptions to 
the capital stock ; when the success of the venture was prac- 
tically assured, and sufficient security in the form of property 
and privileges was gathered in the company, then these " active, 
energetic men " could go to the financial centers and sell the 
mortgage bonds of the company. These bonds furnished enough 
additional money to build the road — and usually many snug 
fortunes besides, which on one pretext and another found their 
way into the pockets of promoters, together with a goodly 
number of bonds. As a regular part of the high-finance methods 
of railway construction, most of these construction companies 
went through foreclosure proceedings, and farmers and towns 
subscribing to stock and municipalities that had made loans 
on inferior mortgages found their securities worthless. 

As an example of these practices I offer a few instances, taken 
from Mr. Gary's History of the St. Paul Company. These in- 
stances all relate to lines now within one company and lying 
within a small district in the southeastern part of the State of 
Wisconsin. The same territory is served by two other roads 
with similar histories. And the conditions represented were 
typical, not only for the entire system of these companies, but 
generally for all railway construction in the country down to 
very recent years. It still continues to some extent. 

About the first step taken toward the construction of the Mil- 
waukee and Mississippi Railroad, the first line of the St. Paul 
system, was to induce the city of Milwaukee to issue bonds. 

The Milwaukee and Fond du Lac Company began business by 
securing the loan of the city's (Milwaukee) credit of $114,000, 
secured to the city by a second mortgage on the proposed line, to 
be subject to a prior mortgage of $10,000 per mile. 

The above company was consolidated with the Milwaukee, 
Fond du Lac and Green Bay Railroad. The city of Milwaukee 
loaned this company $200,000. 

When the Fond du Lac and Green Bay Company had secured 
its loan of Milwaukee city bonds and depot grounds, it in turn 
consolidated with the La Crosse and Milwaukee Railroad 
Company. 

The Milwaukee and Watertown Railroad Company secured 
similar aid from the city in the amount of $200,000. 
6922 



112 

The Milwaukee and Horicon Railway Company in like manner 
secured $160,000. 

The Milwaukee and Mississippi Railway Company in 1867 
began the extension of its line west of Janesville. The funds 
consisted of cash subscriptions to the stock, farm mortgages, 
and Milwaukee city bonds. Of these bonds there were issued 
for this company $300,000 on a second mortgage, and $250,000 
for which the city received only common stock. On the subse- 
quent foreclosure only $96,000 was received for the benefit of all 
stockholders. 

In 1852 the Racine, Janesville and Mississippi Railroad Com- 
pany was organized, and started to raise money to build from 
Racine to Janesville. Racine city issued bonds and subscribed 
to the capital stock to the amount of $300,000. Janesville failed 
to subscribe, so the charter was amended and the line changed 
to go through Beloit, and Beloit issued bonds and subscribed for 
$100,000 of stock. The town of Delavan subscribed for $25,000 ; 
the town of Racine for $50,000. As laid out, the line proposed 
to omit the towns of Burlington and Elkhorn, but upon their 
subscription to the stock they were included. The little town 
of Elkhorn paid $15,000 for the privilege of seeing the cars go by. 

Mr. Cary says: 

The farmers along the line of road subscribed to the capital stock to 
quite an amount, and gave in payment of their subscriptions their 
notes secured by mortgages on their farms. 

As, on subsequent foreclosure sales, the amount realized was 
less than the aggregate of the several mortgages the stock- 
holders necessarily lost. 

On its line constructed from Milwaukee to Portage, 96 miles, 
the La Crosse and Milwaukee Railroad Company raised $1,100,- 
000, or mo*e than $11,000 per mile in farm mortgages alone. 
The method by which these farm-mortgage subscriptions were 
raised is described by Mr. Cary as follows : 

The Milwaukee and Mississippi Railroad had adopted the plan of rais- 
ing funds by procuring farmers to subscribe to the capital stock of the 
company, and mortgaging their farms as security for their notes given 
for such subscriptions, and a considerable amount had, prior to the 
construction of the La Crosse road been realized in that manner on the 
Mississippi Railroad. 

This mode of procedure became quite common with several of the 
roads of Wisconsin, and it was adopted, among others, by the La Crosse 
company, and prosecuted most vigorously and successfully so far as 
obtaining mortgages from the farmers was concerned. 

Deacon Clinton, who had been engaged on that branch of business on 
the Mississippi road, was employed as a special director of the La 
Crosse road, and devoted his entire time to the matter of procuring 
subscriptions from the farmers on this plan. 

Such mortgages were procured to some extent in Washington County, 
very largely in Dodge County, and in Columbia and other counties 
along the line of the road. 

In all, over $1,100,000 of this class of subscriptions were obtained 
for the La Crosse company. 

The modus operandi was for the farmer to subscribe to the stock, 
give his note for the amount of the subscription, payable to the order 
of the company, secured by a mortgage on his farm, bearing from 8 to 
10 per cent interest. The company then attached to said note and 
mortgage its bond guaranteeing the payment of the note and mort- 
gage, principal and interest, and in and by the terms of the bond 
the note and mortgage were assigned to the holder, and such note, 
mortgage, and bond were sold in the market together as one security, 
and not separately, the note not indorsed. An agreement was also 
given to the farmer by which the company agreed to pay the interest 
on the note until it became due, in consideration of which the farmer 
made an assignment of his prospective dividends on the stock so sub- 
scribed for sufficient to pay said interest. 
6922 



113 

It is needless to say that this stock proved worthless ?.nd that the 
farmers were compelled to pay their mortgages, and in very many cases 
lost their farms. 

CONCLUSION. 

Sir, this extended review of the evidence of increasing rates 
and vicious discrimination, of the methods of railroad building, 
overcapitalization, and reckless speculation, demonstrates the 
necessity of the valuation of railroad property as an indispensa- 
ble basis for securing to the people of this country just and 
reasonable rates. Before this bill becomes a law I trust that 
the amendment which I shall offeu, or some better one, will be 
incorporated, making full and complete provision at an early 
date for the true valuation of all the railroad property of the 
United States. 

I can not refrain from suggesting, Mr. President, that the 
railroads of this country can no longer afford to oppose this 
valuation. It is best for them that it should be known. They 
contend that their railroads are worth the amount for which 
they are capitalized. The public contends that the capitaliza- 
tion is grossly in excess of the fair value and not a law- 
ful basis for taxing transportation. This great issue between 
the public and the railroads can be juggled with no longer. 
It can not be settled by legislation which palliates the wrong. 
It must be settled by getting the true value, the fair value of 
railway property. If there is to be an end of antagonism and 
dissension between the people and the transportation companies, 
it can be found, sir, in no other way. 

Mr. President, when it is remembered that the Interstate Com- 
merce Commission is the only tribunal that stands between the 
railroads and the public; when it is considered that the power 
conferred upon the Commission is the power of Congress itself ; 
that the Commission really represents the Government of the 
United States, and when we test the bill before us by the obliga- 
tion of Congress to guard in full measure the public interest 
with all the sovereign power of the Federal Government, does 
not the proposed law seem to fall short of a just and compre- 
hensive treatment of a great subject of legislation? 

I would not be unfair. The bill is not bad in its pro- 
visions, but weak because of its omissions. I do not believe 
that the bill is framed to meet the demands of " special inter- 
ests." Nor has any broad consideration of public interest domi- 
nated its construction. 

It has neither ill intent nor high purpose. Expediency seems 
to have been the controlling factor in framing it. 

It *3ems a response to the impelling necessity for some legis- 
lation. 

It is probably just to the members of the committee who 
joined in reporting this bill to the Senate to say that it is their 
measure of the willingness of Congress to legislate on the sub- 
ject ; that it is as strong a bill as they believe could pass the 
Senate. But if this bill is not amended to meet the public need, 
if it should pass without being strengthened and improved, so 
as to make it a basis upon which to build substantially in the 
future, then it may as well be understood now that it will not 
quiet public interest nor prevent further demands. It will 
become the issue of a new campaign, more certain, more definite, 
and more specific than ever before. 

6922 8 



114 

This session of Congress will be but the preliminary skir- 
mish of the great contest to follow. On the day that it is 
known that only the smallest possible measure of relief has 
been granted the movement will begin anew all over the country 
for a larger concession to public right. That movement loill noi 
stop until it is completely successful. The only basis upon 
which it can be settled finally in a free country is a control of 
the public-service corporations broad enough, strong enough, 
and strict enough to insure justice and equality to all American 
citizens. 

Why pursue a shortsighted, temporizing course? Is it not 
worse than folly to believe that a country like ours, with all its 
glorious traditions, will surrender in this war for industrial 
independence? 

Mr. President, the people of this generation have witnessed 
a revolution which has changed the industrial and commercial 
life of a nation. They have seen the business system of a 
century battered down, in violation of State and Federal 
statutes, and another builded on its ruins. 

They know exactly what has happened and why it has hap- 
pened. 

The farmer knows that there is no open, free competitive 
market for anything he may produce upon his farm. He knows 
that he must accept the prices arbitrarily fixed by the beef 
trust and the elevator combination. He knows that both of 
these organizations have been given control of the markets by 
the railroads. 

The independent manufacturer knows that he no longer has 
an open field and a fairly competitive chance to market his 
product against the trust with its railroad interests. 

The consumer knows that his prices are made for him by 
those who control the avenues of trade and the highways of 
commerce. The public has suffered much. It demands relief. 

Mr. President, Senators in this discussion have avowed that 
they were not to be influenced by popular clamor; that they 
have no sympathy with bigotry that is blind to great railway 
enterprise and the value of the services which these corpora- 
tions render to the public. It has been denounced as meddle- 
some interference for anyone to question the right of the rail- 
ways to fix the markets of this country and to control the 
destination of its commerce. Public discussion in support of 
this legislation is rebuked as " noisy declamation," and we are 
advised that public opinion should be scorned; that it is as 
shifting as the sands of the sea. 

It has been suggested by the Senator from Massachusetts 
[Mr. Lodge] that we might safely, from time to time, adopt 
" certain loose and general propositions " in the form of harm- 
less resolutions, " which thunder in the index, and show that 
we are properly aroused to the dangers arising from corpora- 
tions generally and from railroads in particular, and which do 
not commit us to any specific legislation." 

Sir, I respect public opinion. I do not fear it. I do not hold 
it in contempt. The public judgment of this great country 
forms slowly. It is intelligent. No body of men in this coun- 
try is superior to it. In a representative democracy the com- 
mon judgment of the majority must find expression in the law 
of the land. To deny this is to repudiate the principles upon 
which representative democracy is founded. 

G922 



115 

It is not prejudice nor clamor which is pressing this subject 
upon the attention of this body. It is a calm, well-considered 
public judgment. It is born of conviction — not passion — and it 
were wise for us to give it heed. 

The public has reasoned out its case. For more than a gen- 
eration of time it has wrought upon this great question with 
heart and brain in its daily contact with the great railway cor- 
porations. It has mastered all the facts. It is just. It is 
honest. It is rational. It respects property rights. It well 
knows that its own industrial and commercial prosperity would 
suffer and decline if the railroads were wronged, their capital 
impaired, their profits unjustly diminished. 

But the public refuses longer to recognize this subject as one 
which the railroads alone have the right to pass upon. It de- 
clines longer to approach it with awe. It no longer regards 
the railroad schedule as a mystery. It understands the mean- 
ing of rebates and " concessions," the evasions through " pur- 
chasing agents " and false weights, the subterfuge of " dam- 
age claims," the significance of " switching charges," " midnight 
tariffs," " milling in transit," " tap-line allowances," underbill- 
ing," and " demurrage charges." It comprehends the device 
known as the " industrial railway," the " terminal railway," 
and all the tricks of inside companies, each levying tribute upon 
the traffic. It is quite familiar with the favoritism given to 
express companies, and knows exactly how producer and con- 
sumer have been handed over "by the railroads, to be plundered 
by private car and refrigerator lines, in exchange for their 
traffic. 

The public has gone even deeper into the subject. It knows 
that transportation is vital to organized society ; that it is a 
function of government; that railway lines are the public high- 
ways to market ; that these highways are established under 
the sanction of government ; that the railway corporation dic- 
tates the location of its right of way, lays its tracks over the 
property of the citizen without his consent, and that he must 
market the products of his capital and his labor over this high- 
way, if at all, on the terms fixed by the railway corpora- 
tion. Or, to say it arrogantly and brutally, as did the presi- 
dent of the Louisville and Nashville Railway Company in 
his testimony before the Interstate Commerce Commission, that 
the public can pay the charge which the railroad demands, " or 
it can walk." In short, sir, the public has come to understand 
that the railway corporation is a natural monopoly, which has 
been created by act of government, and that under existing con- 
ditions the public is completely at the mercy of this natural 
monopoly. 

Because it is a natural monopoly, because it is the creature of 
government, it becomes the duty of government to see to it that 
the railway company inflicts no wrong upon the public, to com- 
pel it to do what is right, and to perform its office as a common 
carrier. 

Sir, it is much easier to stand with these great interests than 
against them. This was true when Adam Smith wrote his 
Wealth of Nations, and it is true in 1906. Writing of the strug- 
gle with monopoly in the eighteenth century, he said : 

The member of Parliament who supports every proposition for 
strengthening monopoly is sure to acquire great reputation for under- 
6922 



116 



standing trade, and also great popularity and influence with an order 
of men whose numbers and wealth renfler them of great importance. 
If he opposes them, on the contrary, and still more, if he have author- 
ity enough to thwart them, neither the most acknowledged probity, nor 
the highest rank, nor the greatest public service, can protect him from 
the most infamous abuse and detraction, from personal insults, nor 
sometimes from real danger arising from the influence of furious and 
disappointed monopolists. 

At no time in the history of any nation has it been so difficult 
to withstand these forces as it is right here in America to-day. 
Their power is acknowledged in every community and manifest 
in every lawmaking body. It is idle to ignore it. There exists 
all over this country a distrust of Congress, a fear that monopo- 
listic wealth holds the balance of power in legislation. 

Mr. President, I contend here, as I have contended upon the 
public platform in Wisconsin, and in other States, that the 
history of the last thirty years of struggle for just and equitable 
legislation demonstrates that the powerful combinations of or- 
ganized wealth and special interests have had an overbalancing 
control in State and national legislation. 

For a generation the American people have watched the 
growth of this power in legislation. They observe how vast 
and far-reaching these modern business methods are in fact. 
Against the natural laws of trade and commerce is set the ar- 
bitrary will of a few masters of special privilege. The prin- 
cipal transportation lines of the country are so operated as to 
eliminate competition. Between railroads and other monopolies 
controlling great natural resources and most of the necessaries 
of life there exists a " community of interests " in all cases 
and an identity of ownership in many. They have observed that 
these great combinations are closely associated in business for 
business reasons ; that they are also closely associated in 
politics for business reasons ; that together they constitute a 
complete system ; that they encroach upon the public rights, 
defeat legislation for the public good, and secure laws to pro- 
mote private interests. 

Is it to be marveled at that the American people have become 
convinced that railroads and industrial trusts stand between 
them and their representatives ; that they have come to believe 
that the daily conviction of public officials for betrayal of public 
trust in municipal, State, and national government is but a sug- 
gestion of the potential influence of these great combinations 
of wealth and power? 

During this debate there has been much talk about the coun- 
try having " hysteria." Magazine writers and press correspond- 
ents have been denounced, and there would seem to be an agree- 
ment that they are to be pursued and discredited, lest they 
lodge in the popular mind a wrongful estimate of the public 
service. 

"Sir, it does not lie in the power of any or all of the maga- 
zines of the country or of the press, great as it is, to de- 
stroy, without justification, the confidence of the people in the 
American Congress. Neither can any man on earth, whatever 
his position or power, alter the settled conviction of the intelli- 
gent citizenship of this country when it is grounded on fact 
and experience. It rests solely with the United States Senate 
to fix and maintain its own reputation for fidelity to public 
trust. It wfll be judgad by the record. It can not repose in 
security upon its exalted position and the glorious heritage of 

6922 



117 

Its traditions. It is worse than folly to feel, or to profess to 
feel, indifferent with respect to public judgment If public 
confidence is wanting in Congress, it is not of hasty growth, 
it is not the product of " jaundiced journalism." It is the result 
of years of disappointment and defeat. It is the outgrowth of 
a quarter of a century of keen, discriminating study of public 
questions, public records, and the lives of public men. 

In the Supreme Court, midway between the Senate and the 
House, Mr. Justice Brewer has, for a quarter of a century, in- 
vestigated, analyzed, and construed the legislative work of Con- 
gress. A keen and critical observer of men and events, he can 
speak with wisdom on the development and tendencies of the 
day, and no man will dare to say that he speaks in passion or 
with any ulterior purpose. 

In an address on " The ethical obligation of the lawyer as a 
lawmaker," before the Albany Law School, June 1, 1904, he 
said : 

No one can be blind to the fact that these mighty corporations are 
holding out most tempting inducements to lawmakers to regard in their 
lawmaking those interests rather than the welfare of the nation. 

Senators and Representatives have owed their places to corporate 
influence, and that influence has been exerted under an expectation, if 
not an understanding, that as lawmakers the corporate interests shall 
be subserved. * * * 

The danger lies in the fact that they are so powerful and that the 
pressure of so much power upon the individual lawmaker tempts him 
to forget the nation and remember the corporation. And the danger is 
greater because it is insidious. 

There may be no written agreement. There may be, in- fact, no agree- 
ment at all, and yet, when the lawmaker understands that the power 
exists which may make for his advancement or otherwise and that it 
will be exerted according to the pliancy with which he yields to its 
solicitations, it lifts the corporation into a position of constant danger 
and menace to republican institutions. 

For the first time in many years a great measure is before 
this body for its final action. The subject with which it deals 
goes to the very heart of the whole question. Out of railroad 
combination with monopoly and its power over legislation comes 
the perilous relation which Mr. Justice Brewer says " lifts the 
corporation into a position of constant danger and menace to 
republic-tin institutions." 

Sir, we have the opportunity to meet the demands of the 
hour, or we may weakly temporize while the storm continues to 
gather. 

On Plymouth Rock eighty-six years ago Daniel Webster, look- 
ing with prophetic vision into the century beyond, uttered these 
words, which fall upon this day and generation as a solemn 
mandate : 

As experience may show errors in our establishments we are bound 
to correct them, and if any practices exist contrary to the principles of 
justice and humanity within the reach of our laws or our influence, we 
are inexcusable if we do not exert ourselves to restrain and abolish 
them. 

Mr. President, our responsibility is great; our duty is plain. 
If a true spirit of independent, patriotic service controls Con- 
gress, this bill will be reconstructed on the broad basis of pub- 
lic interest. 

I thank Senators for their attention throughout this pro- 
tracted address. [Applause in the galleries.] 

The VICE-PRESIDENT. Manifestations of applause by the 
occupants of the galleries are forbidden by the rules of the 
Senate. 

6922 



118 

Appendix B. 

Betterments paid for out of profits and surplus. 

[From Mundy's "Earning Power of Railroads." 1906.] 



Name of road. 



Years. 



Amount. 



Baltimore and Ohio Railroad 

Buffalo. Rochester and Pittsburg Railway 

Central of New Jersey 

Delaware, Lackawanna and "Western 

Erie Railroad 

Lehigh Valley Railroad 

New York Central and Hudson River Railroad .... 

New York. Ontario and Western Railroad * 

Northern Central Railway 

Pennsylvania Railroad 

Pennsylvania Company (owned by Pennsylvania Rail- 
road) 

Philadelphia. Baltimore and Washington (consolida- 
tion of Baltimore and Potomac and Philadelphia, 
Baltimore and Washington railroads) 

Reading Company 

Chicago and Eastern Illinois Railroad 

Chicago and Northwestern Railway 

Chicago, Milwaukee and St. Paul Railway 

Chicago, St. Paul. Minneapolis and Omaha Railroad... 

Cleveland, Cincinnati. Chicago and St. Louis Railway. 

Illinois Central Railroad 

Pittsburg. Cincinnati, Chicago and St. Louis Railway . 

"Wabash Railroad 

"Wisconsin Central Railway 

Chesapeake and Ohio Railroad 

Norfolk and Western Railroad.. 

Atchison, Tepeka and Santa Fe Railroad 

Missouri, Kansas and Texas Railroad 

Missouri Pacific Railroad 

Texas and Pacific Railroad 

Great Northern Railway 

Northern Pacific Railway 

Union Pacific Railway 



1899-1905 

1899-1905 

1903-1905 

1901-1904 

1902-1905 

1902-1905 I 

1819-1904 j 

1902-1905 

1900-1904 

1899-1804 

1900-1904 i 



1903-1904 

1905 
1900-1904 
1900-1905 
1900-1916 
1899-1905 
1901-1904 
1900-1905 
1900-1904 
1900-1905 
190ii-1905 
1990-1905 
1900-1905 
1895-1904 
1903-1905 
1901-1903 
1900-1904 
1898-1905 
1898-1905 
1900-19(6 



$19,007,460 
3,122.327 
4,362.8-18 

13,347.16) 
5, 278. 731 
4.144.023 
9,207,099 
2.500,000 
3,641,755 

50,504,133 

,000,000 



3,180.513 
2.710,618 
2,374,390 
26,422,041 

9.9.^9.096 

31. COO. 00 J 

2,479,486 

16.630.040 

3.95*3.427 

4.087.39* 

2.218.75-3 

6.599.842 

12.-50. 000 

30.(00.000 

3.752.932 

6.474.200 

4.902.634 

15.850.0C0 

19.999.603 

13,479,K5 



6922 



Amendments to Strengthen the Bill, and Arguments Made 

BY 

HON. ROBERT M. LA FOLLETTE, 

of wisconsin, 

In the Senate of the United States, 

May 9, 10, 11, 12, U, and 18, 1906. 



The Senate having under consideration the bill (H. R. 12987) to 
amend an act entitled "An act to regulate commerce," approved Feb- 
ruary 4, 1887, and all acts amendatory thereof, and to enlarge the 
powers of the Interstate Commerce Commission — 

May 9, 1906. 

LONG AND SHORT HAUL CLAUSE. 

The VICE-PRESIDENT. The amendment will be printed. 
The Secretary will read the amendment offered by the junior 
Senator from Wisconsin [Mr. La Follette]. 

The Secretary. After the last amendment, just agreed to, 
insert the following, to be known as section la : 

Section la. That section 4 of said act be amended so as to read as 
follows : 

" Sec 4. The Commission created by this act may, in its discretion, 
upon notice and hearing, prohibit any common carrier subject to the 
provisions of this act from charging or receiving any greater compensa- 
tion in the aggregate for the transportation of passengers or like kind 
of property for a shorter than for a longer distance, over the same line 
in the same direction, the shorter being included within the longer dis- 
tance, or may, upon such notice and bearing, prescribe the extent to 
which such greater compensation may be received ; but this shall not 
be construed as authorizing any common carrier within the terms of 
this act to charge or receive as great compensation for a shorter as for 
a longer distance." 

Mr. LA FOLLETTE. Mr. President, I only wish to say a 
word in support of the amendment which I have offered. The 
long and short haul section of the law of 1887 was designed to 
prevent discriminations as between places. As construed by 
the Supreme Court it is in the power of the railroad companies 
to create and maintain conditions which nullify the law. This„ 
they have done until every State suffers on account of discrimi- 
nations which the section as originally enacted was intended to 
prohibit. Every section of our country offers examples of 
higher charges for a short haul than for hauls that are much 
longer — the shorter haul being within and a part of the longer 
haul. 

6922 119 



120 

The amendment proposes to invest the Commission with au- 
thority to determine under what conditions the long and short 
haul principle shall be applied. If adopted as a part of this 
bill, it will be enforced only upon complaint and investigation 
which convinces the Commission that justice requires that it 
should be enforced. Precisely this amendment was recom- 
mended by the Commission in 1897, and that recommendation 
has been reaffirmed and repeated in every report which the 
Commission has submitted to Congress from 1897 to the present 
time. 

The bill presented to the Senate by the Committee on Inter- 
state Commerce, and now under consideration, reenacts the old 
law. and reenacts in section 4 the provision which as construed 
by the Supreme Court, as I said a moment ago, enables a rail- 
road company to nullify the purpose of Congress when it en- 
acted that section in the law of 1887. 

The VICE-PRESIDENT. The question is on agreeing to the 
amendment proposed by the junior Senator from Wisconsin. 
L Putting the question.] The noes seem to have it. 

Mr. LA FOLLETTE. I should like to have the yeas and nays. 

The yeas and nays were ordered ; and the Secretary proceeded 
to call the roll. 

The result was announced — yeas 25, nays 46, as follows : 







YEAS— 25. 




Bacon 


Cullom 


McLauain 


Stone 


Bailey 


Daniel 


Martin 


Taliaferro 


Berry 


Dubois 


Money 


Teller 


Blackburn 


Frazier 


Overman 


Tillman 


Clarke, Ark. 


La Follette 


Pettus 




Clay 


Latimer 


Rayner 




Culberson 


McCreary 


Simmons 
NAYS— 46. 




Aldrich 


Clark, Wyo. 


Hale 


Nixon 


Allee 


Crane 


Hansbrough 


Perkins 


Ankeny 


Dick 


Hemenway 


Piles 


Beveridge 


Dillingham 


Hopkins 


Scott 


Brandegee 


Dolliver 


Kean 


Smoot 


Bulkeley 


Dryden 


Kittredge 


Spooner 


Burkett 


Elkins 


Knox 


Sutherland 


Burnham 


Flint 


Lodge 


Warner 


Burrows 


Foraker 


Long 


Warren 


Carter 


Fulton 


McCumber 


Wetmore 


Clapp 


Gallinger 


Millard 




Clark, Mont. 


Gearin 


Nelson 






NOT VOTING — 18. 




Alger 


Foster 


McBnery 


Penrose 


Allison 


Frye 


Mallory 


Piatt 


Burton 


Gamble 


Morgan 


Proctor 


Carmack 


Gorman 


Newlands 




Depew 


Heyburn 


Patterson 




So Mr. La Follette's amendment was rejected. 



May 10, 1906. 

AMENDMENT TO RESTORE IMPRISONMENT PENALTIES. 

Mr. LA FOLLETTE. I offer the amendment which I send to 
the desk, to come in at the end of section 2. 

The VICE-PRESIDENT. The amendment proposed by the 
junior Senator from Wisconsin will be stated. 
6922 



121 

The Secretary. After the amendment just adopted insert as 
section 2a : 

Sec. 2a. That there be added after section 6 of said act a new sec- 
tion, to be known as section 6a, and to read as follows : 

" Sec. 6a. Every person shall be deemed guilty of a misdemeanor 
who shall, directly or indirectly, do, or cause, procure, or solicit to be 
done, or assist, aid, or abet in the doing of any of the following acts, 
namely : Any act of unjust discrimination as defined in this act, any 
fraudulent act or false representation by which transportation is ob- 
tained or attempted to be obtained at less than the lawfully established 
rate. Said misdemeanors shall be punishable by imprisonment at hard 
labor not more than five years nor less than one year or by fine not 
exceeding $20,000 nor less than $1,000." 

The VICE-PRESIDENT. The question is on agreeing to the 
amendment proposed by the junior Senator from Wisconsin, 
which has just been read. 

Mr. LA FOLLETTE. Mr. President, the amendment which 
I offer imposes the penalty of imprisonment from one to five 
years for any act of unjust discrimination, as defined in the 
interstate-commerce act and the Elkins law amendatory thereof. 
It makes no change in the punishment by fine provided in the 
Elkins law, which is from one thousand to twenty thousand dol- 
lars. My amendment proposes the additional alternative pen- 
alty of imprisonment for violations of the law, now punishable 
by fine only. 

It is the experience of mankind that respect for iaw is in 
some degree dependent upon the penalties imposed for its viola- 
tion. The penalty must be severe enough to deter those dis- 
posed to violate its provisions from incurring the risk of so 
doing. It is a matter of small concern to the railroad to pay a 
fine for lawbreaking when they can exact the money from the 
public to meet the payment. The railroad official shrinks from 
serving a term of imprisonment. The testimony taken by the 
committee of Congress and the reports of the Interstate Com- 
merce Commission bear witness to the fact that the railroad 
companies of the country undertook very soon after the enact- 
ment of the law of 1887 to have stricken out of that law the 
penalties of imprisonment provided for its violation. The In- 
terstate Commerce Commission appeared from time to time be- 
for the committees of Congress and opposed the change. Not- 
withstanding this, the change was made when the Elkins law 
was enacted in 1903. Since that time violations of the inter- 
state-commerce law have been punishable by fine only. 

Mr. LODGE. Mr. President, before the question is put on 
this amendment, I desire merely to say that I have an amend- 
ment pending which I intend to move at the proper time at 
the end of the bill, which provides for the restoration of the 
penal clauses of the original act of 1887, which were repealed 
in the Elkins law, which I think ought to be restored, and 
which I think go quite far enough. 

******* 

The VICE-PRESIDENT. Does the Senator from Massachu- 
setts yield to the Senator from Wisconsin? 

Mr. LODGE. Certainly, I yield to the Senator from Wis- 
consin. 

Mr. LA FOLLETTE. Just to say this, that the language in 
which my amendment is framed is the language of the recom- 
6922 



128 

mendatLon of the Interstate Commerce Commission, with an 
amendment which I suggested here a little time ago, excepting 
as to the amendment increasing the penalty of the act of 1887, 
as already stated by the Senator from Massachusetts. 

******* 

Mr. LODGE. I mention this amendment of mine because I 
wish to say that I shall vote against the amendment of the 
Senator from Wisconsin, which I think is too extreme and 
unnecessary. I think the old law which has been in existence, 
as I have said, for seventeen years is quite sufficient. 

It seems to me also I may say, before I take my seat, that the 
proper place to put this clause is at the end of the bill as a 
new section. The new section that I have proposed reenacts 
the provisions of the Elkins law in certain other respects, but 
repeals the repealing clause and makes all of the offenses sub- 
ject to the penalties prescribed in section 10 of the act of 1887. 

Mr. LA FOLLETTE. Before the Senator from Massachusetts 
yields the floor will he permit me to ask him a question, as I 
can not now take the floor in my own right? 

The VICE-PRESIDENT. Does the Senator from Massachu- 
setts yield to the Senator from Wisconsin? 

Mr. LODGE. Certainly. 

Mr. LA FOLLETTE. Mr. President, I think I was misunder- 
stood in stating that the language of my amendment is in all 
respects tie language recommended by the Interstate Commerce 
Commission. I will say that the penalty which was provided ka 
the amendment which I offered is, so far as the imprisonment 
is concerned, a severer penalty than that suggested by the In- 
terstate Commerce Commission in its recommendation of 1887. 
The fine recommended by the Interstate Commerce Commission 
the last time they submitted a recommendation upon this spe- 
cific paragraph was only §5,000. Since that time the Elkins 
law has increased the fine to $20,000 as the maximum limit. 
Therefore, and for that reason, I have incorporated in this 
amendment the same fine that is provided in the Elkins law, 
but adopted an imprisonment penalty which I believe would be 
severe enough to command the respect of the railroad com- 
panies themselves. 

******* 

Mr. LODGE. I offer the amendment of the Senator from 
Missouri in lieu of my own, and move its substitution for the 
amendment of the Senator from Wisconsin [Mr. La Follette]. 
******* 

The VICE-PRESIDENT. The question is on agreeing to the 
amendment proposed by the Senator from Massachusetts [Mr. 
Lodge] to the amendment of the Senator from Wisconsin [Mr. 
La Follette]. 

Mr. LA FOLLETTE. On that I ask for the yeas and nays. 

The yeas and nays were ordered. 

Mr. FORAKER. We are to vote on the amendment of the 
Senator from Massachusetts? 

The VICE-PRESIDENT. On the amendment proposed by 
the Senator from Massachusetts to the amendment of the 
Senator from Wisconsin. The Secretary will call the roll. 

The Secretary proceeded to call the roll. 
6922 



123 



Mr. SPOONER (when his name was called). I have a general 
pair with the Senator from Tennessee [Mr. CarmackJ. I am 
advised that if he were present he would vote " nay," and I am 
therefore not at liherty to vote. If I were at liberty to vote, I 
would vote " yea." 

The roll call having been concluded, the result was an- 
nounced — yeas 49, nays 27, as follows : 







iTEAS— 49. 




Aldrich 


Crane 


Hemenway 


Perkins 


Alger 


Cullom 


Hopkins 


Piles 


Allee 


Dick 


Kean 


Piatt 


Ankeny 


Dillingham 


Kittredge 


Scott 


Beveridge 


Dolliver 


Knox 


Smoot 


Brandegee 


Dryden 


Lodge 


Stone 


Bulkeley 


Elkins 


Long 


Sutherland 


Bnrkett 


Flint 


McCumber 


Warner 


Burnham 


Foraker 


McEnery 


Warren 


Burrows 


Frye 


Millard 


Wetmore 


Carter 


Fulton 


Nelson 




Clapp 


Gamble 


Nixon 




Clark, Mont. 


Hansbrough 


Penrose 
NAYS— 27. 




Bacon 


Daniel 


Latimer 


Pettus 


Bailey 


Dubois 


McCreary 


Rayner 


Berry 


Foster 


McLaurin 


Simmons 


Blackburn 


Frazier 


Martin 


Taliaferro 


Clarke, Ark. 


Gallinger 


Money 


Teller 


Clay 


Gearin 


Newlands 


Tillman 


Culberson 


La Follette 


Overman 






NOT 


VOTING— 13. 




Allison 


Depew 


Mallory 


Spooner 


Burton 


Gorman 


Morgan 




Carmack 


Hale 


Patterson 




Clark, Wyo. 


Heyburn 


Proctor 





So Mr. Lodge's amendment to the amendment was agreed to. 

The VICE-PRESIDENT. The question recurs on the amend- 
ment of the Senator from Wisconsin [Mr. La Follette] as 
amended. [Putting the question.] In the opinion of the Chair 
the " ayes " have it. 



May 11, 1906. 

TO CONTINUE COMMISSIONS ORDERS IN FORCE. 

The VICE-PRESIDENT. The Senator from Wisconsin pro- 
poses an amendment to the amendment of the Senator from 
Iowa [Mr. Allison], which will be stated. 

The Secretaby. After the word " time," where it appears on 
line 8 of the printed amendment of Mr. Allison, it is proposed 
to strike out the words " not exceeding two years ; " so that if 
amended it will read: 

All orders of the Commission, except orders for the payment of 
money, shall take effect within such reasonable time and shall continue 
in force for such period of time as shall be prescribed in the order of 
the Commission. 

Mr. LA FOLLETTE. Mr. President, after the Commission 
has made an investigation and determined that a given rate is 
reasonable, that rate should remain in force until it is shown 
to be an unjust and unreasonable compensation for the service 
rendered. I know of no reason why such rate should expire 
by limitation. 

I submit, Mr. President, after this Commission has gone over 
the ground, made an investigation, and fixed a rate, it ought 

6922 



124 

not to. be set aside at the end of a two-year period or at the 
end of any period unless that rate is found for some sufficient 
reason to be such a rate as ought no longer to be maintained. 
The Commission will be able to accomplish very little in fix- 
ing rates if the Commission's rates are to expire by limitation 
and the railroad rates be restored without any reason what- 
ever for such change. I am very certain that the only reason 
why the Commission ever suggested such a limitation in the 
first draft of the bill which they proposed was because they 
believed that they could not at the present time secure broad 
and comprehensive legislation from Congress. If they could at 
this time be clothed with authority to determine rates upon their 
own motion, then, sir, I am sure they would not recommend a 
time limitation upon the rates fixed by the Commission. If this 
bill were amended in that important particular the Commission 
would have full authority to revise a rate upon their own mo- 
tion, if justice to the carrier or the public required that it should 
be done. Rate making by the Commission upon complaint only 
will be a slow process at best. The work ought to stand, unless 
there is some good reason for setting it aside. If there is good 
reason for changing a rate once fixed by the Commission, it can 
be made to appear upon investigation. 

The VICE-PRESIDENT. The question is on agreeing to the 
amendment proposed by the Senator from Wisconsin [Mr. La 
Follette] to the amendment of the Senator from Iowa [Mr. 
Allison]. 

The amendment to the amendment was rejected. 

TO PREVENT TRICK OF WITHHOLDING TESTIMONY. 

The VICE-PRESIDENT. The Senator from Wisconsin pro- 
poses an amendment, which will be stated. 

The Secretary. On page 12, after line 14, at the end of the 
section, add the following : 

If upon the trial of any action brought to set aside or modify any 
order made by the Commission under this section evidence shall be 
introduced by the plaintiff which is found by the court to be different 
from that offered upon the hearing before the Commission, or addi- 
tional thereto, the court, before proceeding to render judgment, unless 
the parties to such action stipulate in writing to the contrary, shall 
transmit a copy of such evidence to the Commission, and shall sta> 
further proceedings in such action for fifteen days from the date of 
such transmission. Upon the receipt of such evidence the Commission 
shall consider the same, and may alter, modify, amend, or rescind its 
order relating to such rate or rates, fares, charges, classification, joint 
rate or rates, regulation, practice, or service complained of in said 
action, and shall report its action thereon to said court within ten 
days from the receipt of such evidence. 

If the Commission shall rescind its order complained of, the action 
shall be dismissed ; if it shall alter, modify, or amend the same, such 
altered, modified, or amended order shall take the place of the original 
order complained of, and judgment shall be rendered thereon as though 
made by the Commission in the first instance. If the original order 
shall not be rescinded or changed by the Commission, judgment shall 
be rendered upon such original order. 

Mr. LA FOLLETTE. Mr. President, I have offered this 
amendment, as I have offered others, because I believe it will 
perfect and strengthen the bill. The Commission has been re- 
versed in thirty-two cases. In twenty-six of those cases, as the 
record discloses, it has been reversed because testimony was 
offered upon the trial before the court which was not offered 
when the case was presented to the Commission. The amend- 
6922 



125 



merit proposes that if new testimony is offered when the case 
is on trial by the court, the testimony shall be taken, further 
action suspended thereon, and the record containing all of the 
testimony referred to the Commission for its consideration. 
This would give the Commission the benefit of all the evi- 
dence upon which to base its order. If the original order 
were set aside or modified, the railroad company would then 
have its opportunity to take the opinion of the court upon the 
action of the Commission, and the court would have before it 
the same testimony which the Commission passed upon. This 
amendment, if adopted, will take away from the railroad com- 
panies all inducement to withhold testimony when the Com- 
mission tries the case, because they will not be able to reverse 
the Commission by trying a different case before the court than 
the case tried before the Commission. There would be small 
likelihood that the court would disagree with the Commission. 
There would be less inducement to carry the case to the court 
and we should hear much less criticism Of the Commission. 

It would mean certainly a saving of time and a saving of 
great expense. In many cases which have been appealed from 
the Commission, where additional testimony was taken before 
the court, the writing up of the record containing the additional 
testimony has been a matter of very great expense to the Gov- 
ernment. In one case, I remember, the expense was something 
over $10,000. That case, of course, went on from the circuit 
court to the Supreme Court, and the Commission was reversed. 
Had that case been sent back to the Commission, probably it 
would have been the end of the entire proceeding. If there is 
any objection to this amendment, I should be glad to hear 
somebody state it. 

Mr. HALE. Question ! 

The VICE-PRESIDENT. The question is on agreeing to the 
amendment proposed by the Senator from Wisconsin. 

Mr. LA FOLLETTE. On that I ask for the yeas and nays. 
******* 

The VICE-PRESIDENT. The Secretary will call the roll on 
agreeing to the amendment proposed by the Senator from Wis- 
consin [Mr. La Follette]. 

The question having been taken by yeas and nays, the result 
was announced — yeas 26, nays 49, as follows : 







YEAS — 26. 




Bacon 


Culberson 


Latimer 


Rayner 


Bailey 


Daniel 


McCreary 


Simmons 


Berry 


Dubois 


McLaurin 


Taliaferro 


Blackburn 


Foster 


Martin 


Teller 


Clark, Mont. 


Frazier 


Money 


Tillman 


Clarke, Ark. 


Gear in 


Newlands 




Clay 


La Follette 


Overman 






NAYS— 49. 




Aldrich 


Dick 


Kean 


Pettus 


Alger 


Dillingham 


Kittredge 


Piles 


Allee 


Dolliver 


Knox 


Piatt 


Ankeny 


Dryden 


Lodge 


Scott 


Brandegee 


Flint 


Long 


Smoot 


Bulkeley 


Foraker 


McCumber 


Stone 


Burkett 


Fulton 


McEnery 


Sutherland 


Burnham 


Gallinger 


Millard 


Warner 


Burrows 


Gamble 


Morgan 


Warren 


Carter 


Hale 


Nelson 


Wetmore 


Clark, Wyo. 


Hansbrough 


Nixon 




Crane 


Hemenway 


Penrose 




Cullom 


Hopkins 


Perkins 




6922 









12G 

NOT VOTING— 14. 
Allison Clapp Gorman Proctor 

Beveridge Depew Heyburn Spooner 

Burton Elkins Mai lory 

Carmack Frye Patterson 

So Mr. La Follette's amendment was rejected. 
******* 

POWER TK) FIX MAXIMUM RATES AND DIFFERENTIALS. 

Mr. LA FOLLETTE. I desire to offer, before we pass to the 
other section, the following, which I send to the desk. 

The VICE-PRESIDENT. The Senator from Wisconsin pro- 
poses an amendment, which will be read. 

The Secretary. It is proposed to add, at the end of sec- 
tion 4 

Mr. LA FOLLETTE. Not at the end of section 4, but as a 
substitute for section 4, or section 15 of the act of 1889. 

The VICE PRESIDENT. The Senator from Wisconsin pro- 
poses a substitute for section 4, which will be read. 

The Secretary. On page 10 of the bill, after line 6, strike out 
the remainder of the section and insert : 

Sec. 15. That the Commission is authorized and empowered, and it 
shall be its duty, whenever, after full hearing upon any inquiry insti- 
tuted by the Commission upon its own motion or upon a complaint 
made, as provided in section 13 of this act, or upon complaint of any 
common carrier, it shall be of the opinion that any of the rates or 
charges whatsoever demanded, charged, or collected by any common 
carrier or carriers subject to the provisions of this act, for the trans- 
portation of persons or property as defined in the first section of this 
act, or that any regulations or practices whatsoever of such carrier or 
carriers affecting such transportation are unjust or unreasonable, or 
unjustly discriminatory or unduly preferential or prejudicial, or other- 
wise in violation of any of the provisions of this act, to determine and 
prescribe what will, in its judgment, be the just and reasonable rate or 
rates, charge or charges, to be thereafter observed ; and in so doing the 
Commission shall have power (a) .to fix a maximum rate; (b) to fix a 
differential and to prescribe both a maximum and a minimum rate, to 
enforce the same when that may be necessary to prevent discrimina- 
tions forbidden by the third section, but not otherwise; (c) to change 
the classification of any article; (d) to determine what regulation or 
practice in respect to such transportation is just and reasonable to be 
thereafter followed and to make an order that the carrier shall cease 
an<4 desist from such violation to the extent to which the Commission 
find the same to exist and shall not thereafter publish, demand, or col- 
lect any rate or charge for such transportation in violation of the rate 
or charge so prescribed and shall conform to the regulation or practice 
so prescribed. Such order shall go into effect thirty days after notice 
to the carrier and shall remain in force and be observed by the car- 
rier, unless the same shall be suspended or modified or set aside by the 
Commission or be suspended or set aside by a court of competent juris- 
diction. Whenever the carriers shall fail to agree among themselves 
upon the apportionment or division of such joint rates, fares, or charges 
the Commission may, after hearing, make a supplemental order pre- 
scribing the portion of such joint rate to be received by each carrier 
party thereto, which order shall take effect as a part of the original 
order. 

The Commission is also authorized and empowered, and it shall be 
its duty, whenever, after full hearing upon any inquiry instituted by 
the Commission upon its own motion or upon a complaint made, as pro- 
vided in section 13 of this act, or upon complaint of any common car- 
rier, to establish through routes and joint rates to be charged and to 
prescribe the division of such rates as hereinbefore provided and the 
terms and conditions under which such through routes shall be oper- 
ated, when that may be necessary to giye effect to any provisions of 
this act and the carriers complained of have refused or neglected to 
voluntarily establish such through routes and joint rates. Such au- 
thority shall extend to the establishment of through routes and through 
rates Wholly by railroad and partly by railroad and partly by water. 

If the owner of property transported under this act directly or indi- 
rectly renders any service connected with such transportation, or fur- 
nishes any instrumentality used therein, the charge and allowance 
therefor shall be no more than is just and reasonable, and the Com- 
6922 



127 

mission mav, after hearing on a complaint, determine what is a reason- 
able charge" as the maximum to be p?.id by the carrier or carriers for 
the service so rendered or for the use of the instrumentality so fur- 
nished, and fix the same by appropriate order, which order shall have 
the same force and effect and be enforced in like manner as the orders 
above provided for in this section. 

The foregoing enumeration of powers shall not exclude any power 
which the Commission would otherwise have in the making of an order 
under the provisions of this act. 

Mr. LA FOLLETTE. Mr. President, I will take the time of 
the Senate at this late hour to state very briefly the difference 
between the substitute which I propose and section 15 of the 
pending bill. 

Section 15 provides that the Commission shall have author- 
ity to fix a maximum rate. The proposed amendment gives the 
Commission authority to fix a maximum rate and, under cer- 
tain circumstances, a minimum rate, and also gives them control 
of classification. 

That states in a few words substantially the difference be- 
tween section 15 of the pending bill and the amendment which 
I have proposed. The bill prepared by the Commission and sub- 
mitted to the committees of Congress having charge of this 
legislation contains the essential provisions of the substitute 
which I propose for section 15. In the general debate I set 
forth at some length the reasons why section 15 should be 
amended and the changes which I believed should be made in 
it. I will not tnke the time to go into it more fully at present. 

Mr. DOLLIVER. Mr. President, I think it is due to the com- 
mittee to say a word about these provisions. The substitute 
which my honorable friend from Wisconsin has offered pre- 
sents two or three matters of importance. The first one is that 
his substitute clothes the Interstate Commerce Commission with 
power to originate complaints. That is one of the things which 
they did not include in the bill which they sent to the com- 
mittee. 

* * * * * * * 

Mr. LA FOLLETTE. I did neglect to state that this section 
clothes the Commission with power to make an order upon an 
investigation which has originated with the Commission. Sec- 
tion 13 of the bill as reported by the committee leaves with the 
Commission authority to make an investigation upon its own 
motion, but section 15 does not empower the Commission to 
make the order to correct a wrong which it may discover upon 
an investigation under section 13. 

Now, section 15, which I propose as a substitute, corrects that 
obvious defect in the pending bill. That is the only difference 
with reference to this particular point. It is manifestly absurd 
to allow the Commission to make an investigation on its own 
motion under section 13 and then withhold from it all authority 
to issue an order to remedy the defect or evil which the investi- 
gation has disclosed. 

Mr. DOLLIVER. What the Senator says is absolutely cor- 
rect. I have spent a good many hours the past winter in the 
society of the Interstate Commerce Commission. I will say for 
them that they appear to be the only people in this town who 
have a definite and coherent knowledge of the practical aspects 
of the problems with which we are dealing, and I recognize that 
fact as thoroughly as my friend from Wisconsin. 
6922 



128 

I say to the Senate, therefore, that it is not the notion of the 
Interstate Commerce Commission that there is any need for 
them to be clothed with the power of originating these com- 
plaints. It is their opinion, and I think every practical-minded 
man will share it, that if we succeed in dealing with all the 
questions that arise on complaint we will have covered about as 
large a field as seven able-bodied men will be able to attend to. 

I will go further. If the Commission, in making the investi- 
gations authorized by section 13, finds itself face to face with a 
situation that needs correction, there is no difficulty in securing 
a complaint to correspond with the trouble which they have dis- 
covered. That is the view of the subject which they take. So 
much for that. 

Now, the second departure of this substitute from the pend- 
ing bill is in respect to the maximum rates and minimum rates, 
and the relation of rates. I have had the opinion that it would 
be a good thing to put in a section giving the Commission control 
over the relation of rates, but the more I meditate upon the prac- 
tical features of the problem the less importance I attach to it. 
I hold that the command of the high rate, given in section 4 of 
the pending bill, accomplishes every substantial result that could 
be obtained by all the other provisions which are contained in 
the substitute. 

I know of no discrimination which is unjust and unlawful, 
either in rates or classification, that can not be corrected by re- 
ducing the rate at its high point, or attaching to the article the 
rate of the class to which it belongs. If there is a Senator in 
this Chamber who can give an illustration of a discrimination 
forbidden by law which can not be corrected by the intelligent 
exercise of the power over the high rate, I would be glad to 
suspend a minute to have the illustration given. 

Mr. LA FOLLETTE. I should like to furnish that case, if 
I may. 

The VICE-PRESIDENT. Does the Senator from Iowa yield 
to the Senator from Wisconsin? 

Mr. DOLLIVER. Certainly. 

Mr. LA FOLLETTE. Exactly such cases are cited by the 
Interstate Commerce Commission, not alone in one, but in sev- 
eral of their reports. I call your attention to one instance. 
An attempt was made to regulate the rates between Winona, 
La Crosse, and Eau Claire and Iowa markets for lumber by 
fixing a maximum rate. This case occurred under the law 
of 3887, before the Supreme Court deprived them of power to 
fix rates. The lumber merchants of Eau Claire were unable to 
get into the Iowa market as against the lumber merchants of 
La Crosse and Winona without having the rate changed. They 
applied to the Interstate Commerce Commission to change the 
rate. They lowered the rate and fixed a maximum rate, where- 
upon the railroad companies at once dropped the rate for 
Winona and La Crosse below the rate fixed for Eau Claire, and 
continued to exclude the Eau Claire lumber merchants from the 
Iowa market. 

Mr. DOLLIVER. I will say to my honorable friend I am 
familiar with that case, and I will ask him not to dispose of 
my time any longer. 

Mr. LA FOLLETTE. Just a moment. The Commission cite 
that very case as illustrating the necessity of clothing them with 
power to fix a minimum rate. 
nr>22 



129 

The VICE-PRESIDENT. The Senator from Iowa declines to 
yield. 

Mr. DOLLIVER. And let me say to my honorable friend, in 
such case under this bill all in the world that would be neces- 
sary is for the Interstate Commerce Commission to make an- 
other order, and if the railroads continued the discrimination 
there certainly would be nothing to prevent the Commission 
from accepting the challenge. 

****** * 

Mr. LA FOLLETTE. I wish to ask the Senator this question : 
As I understand him, he says the difficulty could be met by 
simply lowering the maximum rate. Now, is it not true that no 
matter what maximum rate is fixed, the railroad may still dis- 
criminate by lowering the competing rate? If there were 
authority to fix a minimum rate the railroad could not continue 
the discrimination. 

Mr. BAILEY. Mr. President, the trouble with the answer 
which the Senator from Iowa [Mr. Dollivee] has made to the 
Senator from Wisconsin [Mr. La Follette] is that it will not 
work. He says that the Commission can easily remedy a 
trouble such as that instanced by the Senator from Wisconsin 
by still further reducing the rate; but the Senator from Iowa 
forgets that his own bill commands the Commission to fix a rate 
that is reasonable and just as a maximum, and when that is 
done the Commission can not put it any lower. If it does, the 
railroad goes into court and restrains it as unjust and unrea- 
sonable. Therefore the evil can not be corrected in that way. 
****** * 

The VICE-PRESIDENT. The question recurs on the amend- 
ment in the nature of a substitute proposed by the Senator from 
Wisconsin [Mr. La Follette]. 

The amendment was rejected. 



May 12, 1906. 

TO DISQUALIFY FEDERAL JUDGES FROM HEARING AND DECIDING CASES 
WHEN THEY OWN STOCKS OR BONDS OF RALIROADS OR ACCEPT AND USE 
FREE PASSES. 

The VICE-PRESIDENT. The question now recurs on the 
amendment proposed by the Senator from Iowa [Mr. Allison]. 

Mr. LA FOLLETTE. Mr. President, I offer the amendment 
which I send to the desk, to be inserted after the word 
" courts," in line 9 of the pending amendment. 

The VICE-PRESIDENT. The amendment proposed by the 
Senator from Wisconsin to the amendment will be stated by the 
Secretary. 

The Secretary. At the end of Mr. Allison's amendment it 
is proposed to insert the following : 

Every Federal judge who owns any share of the capital stock or any 
of the bonds of a common carrier subject to the provisions of this act, 
or who accepts or uses, or who procures for the use of any person, 
any pass or privilege for transportation withheld from any other per- 
son, is hereby disqualified and prohibited from hearing or passing upon 
as such judge any motion, question, application, proceeding, or from 
presiding at or hearing any trial arising under the provisions of 
this act. 

6922 9 



130 

The VICE-PRESIDENT. The question is on agreeing to the 
amendment proposed by the Senator from Wisconsin [Mr. La 
Follette] to the amendment of the Senator from Iowa [Mr. 
Allison]. 

Mr. LA FOLLETTE. I should like to have the yeas and nays 
on that amendment, Mr. President. 

I understand, from queries within my hearing, that many 
Senators do not understand what the amendment is, Mr. Presi- 
dent, and, if I am in order, I should like to explain it just in a 
word, or I will ask to have the amendment again read, in order 
that it may be understood. 

The VICE-PRESIDENT. The amendment will be again read. 

The Secretary again read the amendment proposed by Mr. 
La Follette to Mr. Allison's amendment. 

Mr. LA FOLLETTE. Mr. President, the law now precludes 
any member of the Interstate Commerce Commission from hold- 
ing or owning any stocks or bonds in any railroad company sub- 
ject to the provisions of this act. Why the courts or the judges 
who are to review the proceedings of the Commission here 
should not be likewise barred from ownership of the stocks 
or bonds of any railroad company subject to the provisions of 
this act, I am at a loss to understand. 

In addition to that, my proposed amendment would dis- 
qualify any Federal judge from hearing any motion, presiding 
at any trial, or deciding any question affecting an interstate 
railroad where such judge has accepted a railroad pass or has 
procured railroad passes for others. Any judge who does that 
now violates the interstate-commerce law. I assert that there 
are Federal judges who are accepting and using passes in this 
country to-day in violation of law. 

No judge should be permitted to hear, try, and determine a 
case under a statute, the provisions of which he is himself guilty 
of violating. 

Since I have offered this amendment Senators on this floor 
have informed me of specific instances where Federal judges 
have procured passes for members of their families ; of other 
cases where they have been furnished private cars and trans- 
portation for large parties, in violation of the positive but some- 
what weak provisions of existing statute. It offends one's sense 
of justice as well as propriety, and in every such case the law 
should disqualify the judge from acting. 

If any Senator upon this floor can find a good reason for say- 
ing that a judge who is to determine any question arising under 
this bill, when it shall become a law, should be interested in 
the property of the railroad company that is to be affected by 
the question of rates involved, I should like to have him rise 
in his place and proclaim it now. There is not a lawyer on this 
floor who in any suit against a railway company would be 
willing to submit the case of his client to a jury of twelve men 
with railroad passes in their pockets. Neither should a judge 
who receives favors from a railroad company be permitted to 
try any case in which the interests of the railroad company are 
involved. 

Mr. HALE. Mr. President, I have some respect for the judi- 
ciary of the United States. I think there ought to be a halt 
in the Senate somewhere, so I move to lay the amendment 
6922 



131 



upon the table, and upon that motion I ask for the yeas and 
nays. 

The VICE-PRESIDENT. The question is on the motion of 
the Senator from Maine to lay the amendment of the Senator 
from Wisconsin [Mr. La Follette] to the amendment of the 
Senator from Iowa [Mr. Allison] on the table, on which mo- 
tion the Senator from Maine demands the yeas and nays. 

The yeas and nays were ordered ; and the Secretary pro- 
ceeded to call the roll. 

Mr. LATIMER (when his name was called). I am paired 
with the senior Senator from New York [Mr. Platt]. If he 
were present, I should vote " nay." 

The roll call having been concluded, the result was an- 
nounced — yeas 40, nays 27, as follows: 

YEAS— 40. 



Aldrich 


Clapp 


Frye 


Millard 


Alger 


Clark, Wyo. 


Fulton 


Nixon 


Allee 


Cullom 


Gamble 


Perkins 


Allison 


Dick 


Hale 


Piles 


Ankeny 


Dillingham 


Hansbrough 


Scott 


Brandegee 


Dolliver 


Hopkins 


Smoot 


Bulkeley 


Dryden 


Kean 


Spooner 


Burnham 


Elkins 


Kittredge 


Sutherland 


Burrows 


Flint 


Lodge 


Warner 


Carter 


Foraker 


Long 


Wetmore 




NAYS 27. 




Bacon 


Daniel 


McCreary 


Rayner 


Bailey 


Dubois 


McCumber 


Simmons 


Berry 


Foster 


McLaurin 


Stone 


Blackburn 


Frazier 


Martin 


Taliaferro 


Clarke, Ark. 


Gallinger 


Morgan 


Teller 


Clay 


Gearin 


Newlands 


Tillman 


Culberson 


La Follette 


Overman 






NOT. 


VOTING— 22. 




Beveridge 


Depew 


McEnery 


Pettus 


Burkett 


Gorman 


Mallory 


Platt 


Burton 


Hemenway 


Money 


Proctor 


Carmack 


Heyburn 


Nelson 


Warren 


Clark, Mont. 


Knox 


Patterson 




Crane 


Latimer 


Penrose 





So the motion of Mr. Hale to lay Mr. La Follette's amend- 
ment to the amendment of Mr. Allison on the table was 
agreed to. 



May U h 1906. 

TO GIVE COMMISSION BENEFIT OF NEW EVIDENCE OFFERED IN A TRIAL 

COURT. 

Mr. LA FOLLETTE. If it is in order, I wish to offer a substi- 
tute for the pending amendment. 

The VICE-PRESIDENT. It is in order. The junion Senator 
from Wisconsin moves a substitute, which will be read. 

The Secretary. After the word " courts," on page 17, insert : 

Upon the trial of any action brought to set aside or modify any 
order made by the Commission under this section a copy of the evidence 
Introduced by the plaintiff upon motion made upon behalf of the Com- 
mission shall be transmitted to the Commission, and the court shall 
stay further proceedings in such action for fifteen days from the date 
of such transmission. Upon the receipt of such evidence the Commis- 
sion shall consider the same, and may alter, modify, amend, or rescind 
6922 



132 

its order relating to such rate or rates, fares, charges, classification, 
joint rate or rates, regulation, practice, or service complained of in said 
action, and shall report its action thereon to said court within ten days 
from the receipt of such evidence. 

Ir the Commission shall rescind its order complained of, the action 
shall he dismissed ; if it shall alter, modify, or amend the same, such 
altered, modified, or amended order shall take the place of the original 
order complained of, and judgment shall be rendered thereon as though 
made by the Commission in the first instance. If the original order 
shall not be rescinded or changed by the Commission, judgment shall 
be rendered upon such original order. 

Mr. HALE. Mr. President, I move to lay the amendment on 
the table. 

The VICE-PRESIDENT. The Senator from Maine moves to 
lay the substitute proposed by the Senator from Wisconsin [Mr. 
La FolletteI on the table. 

Mr. LA FOLLETTE. On that I will ask for the yeas and 
nays. 

Mr. HOPKINS. I wish to know if the Senator from Maine 
will not suspend that motion until we can hear from the Senator 
offering the substitute? 

The VICE-PRESIDENT. Is there a second to the demand 
for the yeas and nays? 

The yeas and nays were ordered. 

The VICE-PRESIDENT. The Secretary will call the roll. 

The Secretary proceeded to call the roll. 

Mr. OVERMAN. Mr. President, I ask that the amendment 
may be read. 

Mr. ALDRICH, Mr. FRYE, and others. Too late! 

The VICE-PRESIDENT. The Senator from North Carolina 
[Mr. Overman] rose before a response had been made to the 
roll call. The Secretary will again state the proposed amend- 
ment. 

The Secretary again read Mr. La Follette's amendment to 
the amendment proposed by Mr. Daniel. 

The VICE-PRESIDENT. The Secretary will resume the call- 
ing of the roll. 

The Secretary resumed the calling of the roll. 

Mr. SPOONER (when his name was called). As I announced 
the other day, I am paired with the Senator from Tennessee [Mr. 
Carmack], who is absent. If I were at liberty to vote, I should 
vote " yea." 

Mr. CLARK of Wyoming (when Mr. Warren's name was 
called). I desire to announce the unavoidable absence of my 
colleague [Mr. Warren] from the city. I desire also to an- 
nounce that he is paired with the Senator from Mississippi [Mr. 
Money]. I make this announcement for the remainder of the 
day. 

The roll call having been concluded, the result was an- 
nounced — yeas 41, nays 30, as follows : 







YEAS— 41. 




Aldrich 


Clark, Wyo. 


Gamble 


Perkins 


Alger 


Crane 


Hale 


Piles 


Allee 


Dick 


Hansbrough 


Piatt 


Allison 


Dillingham 


Hemenway 


Proctor 


Brandegee 


Dolliver 


Kean 


Scott 


Bulkeley 


Dryden 


Kittredge 


Smoot 


Burkett 


Flint 


Lodge 


Sutherland 


Burnham 


Foraker 


Long 


WetmoFe 


Burrows 


Frye 


McCumber 




Carter 


Fulton 


Nixon 




Clark, Mont. 


Gallinger 


Penrose 




6922 









133 





NAYS— 30. 




Bacon 


Foster 


McLaurin 


Simmons 


Berry 


Frazier 


Mallory 


Stone 


Blackburn 


Gearin 


Martin 


Taliaferro 


Clay 


Hopkins 


Morgan 


Teller 


Culberson 


Knox 


Newlands 


Tillman 


Cullom 


La Follette 


Overman 


Warner 


Daniel 


McCreary 


Pettus 




Dubois 


McEnery 


Rayner 






NOT 


VOTING— 18. 




Ankeny 


Clapp 


Heyburn 


Patterson 


Bailey 


Clarke, Ark. 


Latimer 


Spooner 


Beveridge 


Depew 


Millard 


Warren 


Burton 


Elkins 


Money 




Carmack 


Gorman 


Nelson 





So Mr. La Follette's amendment to the amendment proposed 
by Mr. Daniel was laid upon the table. 



PROVIDING FOR VALUATION OF RAILROADS. 

Mr. LA FOLLETTE. Mr. President, I offer the amendment 
which I send to the desk. 

The VICE-PRESIDENT. The amendment proposed by the 
Senator from Wisconsin will be stated. 

The Secretary proceeded to read the proposed amendment 
of Mr. La Follette, which appears on page 139 of the pamphlet 
amendments. 

Mr. LA FOLLETTE. There is much confusion on the floor, 
and, as the amendments which I offer seem to be waited for 
by some Republican colleagues with motions to lay upon the 
table, I should like to have order at least when the amend- 
ments are read, so that they may be understood when voted 
upon. 

The VICE-PRESIDENT. The Senate will be in order. 

Mr. TILLMAN. Will the Senator please indicate on what 
page of the pamphlet amendments his amendment comes in? 

The Secretary. On page 139. 

Mr. LA FOLLETTE. I will ask that the amendment be 
again read from the beginning, as there has been such con- 
fusion in the Chamber that I am sure not only the place where 
the amendment is to be inserted is not understood, but the 
character of the amendment itself is not understood. 

The VICE-PRESIDENT. The Secretary will resume from 
the beginning the reading of the afeiendment. 

The Secretary. On line 2, page 25, it is proposed to insert 
a new section, as follows: 

Sec. 7a. That section 19 of said act be amended by adding thereto 
a new section to be known as section 19a, and to read as follows : 

" Sec. 19a. The Commission shall investigate and ascertain the fair 
value of the property of every railroad engaged in interstate com- 
merce, as defined in this act, and used by it for the convenience of 
the public. For the purpose of such investigation the Commission is 
authorized to employ such engineers, experts, and other assistants as 
may be necessary. Such investigation shall be commenced not later 
than July 1, 1906, and shall be prosecuted with diligence and thor- 
oughness and the results thereof reported to Congress at the beginning 
of each regular session. Such valuation shall show the value of the 
property of every railroad as a whole, and the value of its property 
in each of the several States or Territories or the District of Co- 
lumbia. Every such railroad shall furnish to the Commission, from 
time to time, and as the Commission may require, maps, profiles, con- 
tracts, reports of engineers, and other documents, records, and papers, 
6922 



134 

or copies of any or all of the same, in aid of such investigation and 
determination of the value of the property of said railroad, and every 
such railroad is required to cooperate with the Commission in the work 
of the valuation of its property in such further particulars and to 
such extent as the Commission may direct. 

" The Commission shall, thereafter, in like manner, keep itself in- 
formed of all extensions and improvements or other changes in the con- 
ditions of the property of the said railroads, and ascertain the fair 
value thereof, and from time to time, as may he required for the regu- 
lation of railways under the provisions of this act, revise and correct 
its valuation of railway property. To enable the Commission to make 
such changes and corrections in its valuation, every railroad engaged 
in interstate commerce, as defined in this act, is required to report 
currently to the Commission, and as the Commission may require, all 
improvements and changes in its property, and to file with the Com- 
mission copies of all contracts for such improvements at the time the 
same are executed. 

" Whenever the Commission shall have completed the valuation of 
the property of any railroad, and before said valuation shall become 
final, the Commission shall give notice by registered letter, to the com- 
pany or companies owning or operating said railroad, stating the valua- 
tion placed upon the several lines of road and classes of property of the 
said company, used by it for the convenience of the public, and shall 
allow the company or companies twenty days in which to file a protest 
of the same with the Commission. If no protest is filed within twenty 
days, such valuation shall become final. 

" If notice of contest is filed by any railroad the Commission shall 
fix a time for hearing the same, and shall proceed as promptly as may 
be to hear and consider any matter relative and material thereto pre- 
sented by such railroad in support of its protest so filed as aforesaid. 
If after hearing any contest of such valuation under the provisions of 
this act, the Commission is of the opinion that its valuation is incor- 
rect, it shall make such changes as shall make the saeae a fair valuation 
of such property, and shall issue an order making such corrected 
valuation final. All final valuations by the Commission shall be prima 
facie evidence of the fair value of the railroad property in all proceed- 
ings under this act." 

Mr. CLARKE of Arkansas. Mr. President 

Mr. HALE. I move to lay the amendment on the table. 

The VICE-PRESIDENT. The Senator from Maine moves to 
lay the amendment on the table. 

Mr. MONEY. Mr. President, I should like to have the Sena- 
tor from Maine, if he will, withhold that motion for a moment. 
I am not at liberty to vote on this proposition, because I am 
paired, but I should like to have about a minute to state ex- 
actly how I stand on it, if the Senator does not object to my 
consuming so much time. 

Mr. HALE. The Senator is so modest in his request, that I 
for a moment withhold the motion. 

Mr. MONEY. I am obliged to the Senator. 

Mr. President, I do not want that amendment tabled without 
placing myself fairly upon the record in regard to it. I be- 
lieve it would be the most valuable part of this bill if it could 
be adopted. I do not understand how the railroad Commis- 
sion can ever fix a just and reasonable rate without first ascer- 
taining, as a basis for valuation, the value of the roads them- 
selves ; what dividends will be declared upon a certain amount 
invested, and what profits should accrue from certain services 
rendered. I do not understand how it is possible to come ac- 
curately and reasonably near the truth except by a valuation 
of the property and the amount of money invested. Of course, 
there are other circumstances that will enter into account in 
fixing the rate and the compensation of the carrier; but this 
certainly must be the basis. It is what I understand the Inter- 
state Commerce Commission have been for years calling for, 
6922 



135 

and in one decision of the Supreme Court they said it was the 
only moans by which a fair rate could be fixed. 

I desired to make these remarks simply that I might go upon 
the record as supporting this amendment. 

Mr. HALE. I move to lay the amendment on the table. 

Mr. SPOONER. Mr. President, I do not know whether or 
not my colleague [Mr. La Follette] desires to be heard upon 
this amendment. If he does for fifteen minutes, I think upon 
every principle which has prevailed in the Senate he is en- 
titled to do so. 

Mr. HALE. Mr. President, the junior Senator from Wiscon- 
sin [Mr. La Follette] has never shown himself incapable of as- 
serting his own rights. He did not rise to debate the amend- 
ment, and no Senator rose for that purpose. 

Mr. CLARKE of Arkansas. I beg the Senator's pardon. 
When he makes that statement, he evidently overlooked the 
fact that I had addressed the Chair at the time, with a* view of 
having something to say, though I could not hope that the Sen- 
ate would be greatly enlightened thereby. 

Mr. LA FOLLETTE. If I may be permitted, I should like 
to say that before the Senator from Maine took the floor the 
Senator from Arkansas was on his feet to debate this amend- 
ment. 

Mr. HALE. I had not perceived that. 

Mr. LA FOLLETTE. I know that several other Senators de- 
sire to debate it. 

Mr. HALE. Mr. President, the amendment speaks for itself. 
It involves in itself a very large proposition, a distinctive fea- 
ture, which with all ingenuity that might be employed, Senators 
could not be much better impressed than by the reading of the 
amendment. My object was not to interfere personally with 
any one Senator, or another Senator, but, in accordance with 
what I believe to be the feeling of the Senate upon matters 
which the Senate understands and comprehends, when an 
amendment is read, for one I propose, whenever an opportunity 
affords, to give the Senate a chance of laying the amendment 
upon the table, and thereby to end it. I shall not waive this 
right in this case, if the Chair recognizes me, for general de- 
bate upon this matter. If the Senator from Wisconsin, who has 
offered the amendment, believes that he can add anything to 
the clear, measured language of his amendment by anything 
that he may say, I will withhold my motion until he has that 
opportunity ; but I will leave that entirely to him. 

Mr. CLARKE of Arkansas. Mr. President, I do not under- 
stand that any Senator has the right to indicate what particu- 
lar Senator shall address the Senate, nor for how long, nor 
what he shall say about any pending matter. When the Sen- 
ator from Maine withdraws his motion and turns the question 
over to the Senate, it will be a matter of opportunity whether or 
not he can be recognized a second time to make his motion ; but 
he can not extend his motion with a string to it, and say who 
shall speak and who shall not. He may insist upon the deci- 
sion of his motion now, or withdraw it. 

Mr. HALE. I am withholding the motion only as a matter 

of courtesy. I said to the Senator offering the amendment that 

if he asked to explain it, I would, as a matter of courtesy, 

withhold my motion. I do not in that select him. He. has 

6922 



136 

selected himself. He has a right to offer the amendment. I 
am not invidious in any distinction ; I am not seeking to inter- 
fere with the Senator from Arkansas particularly, but I think 
that the Senate is ready for the question. 

Mr. CLARKE of Arkansas. Let the Senate be the judge of 
that. If the Senator makes a motion, it is before the Senate to 
be disposed of: if he withdraws that motion, then it is for the 
Senate to determine its own course of proceeding. 

****** * 

The VICE-PRESIDENT. The Senator from Arkansas will 
suspend until the Senate is in order. 

Mr. CLARKE of Arkansas. As I was saying, many amend- 
ments have been presented, discussed, and disposed of 

Mr. HALE. Will the Senator allow me? 

The VICE-PRESIDENT. Does the Senator from Arkansas 
yield to the Senator from Maine? 

Mr. CLARKE of Arkansas. Certainly. 

Mr. HALE. I rise to the only point of order I can make — 
that there ought to be order in the Chamber. At the little dis- 
tance that I am from the Senator I can not hear a word he says. 
It is not his fault. It is the fault of the Senate. 

The VICE-PRESIDENT. The Senate will be in order. 

Mr. CLARKE of Arkansas. As I was saying, Mr. President, 
many amendments have been offered for consideration in con- 
nection with the pending bill which presented different theories 
of regulation or different theories of disposing of some feature 
of the general plan of regulating railroad rates. There was 
room for discussion, room for differences of opinion, as to the 
best method of disposing of them. But this amendment is one 
that presents no issue between those who favor the passage of 
any effective bill. The only issue that could arise would be be- 
tween those who favor the passage of such a measure and those 
who oppose the passage of any legislation whatever on the sub- 
ject. It is the primary and fundamental step to be taken in any 
rational system of regulation. There must be an ascertainment 
of the value of the property to be regulated before there can 
be computed a just and reasonable compensation for its use. 
That computation must be made by some one before any step 
whatever can be taken in the matter of fixing rates. 

The Supreme Court of the United States has fixed somewhat 
the limits of the authority to be delegated to those who admin- 
ister this right to fix rates to be charged by common carriers, 
and the doctrine there declared is that the compensation to 
which the carrier is entitled is a just return upon the value of 
the property at the time the same is used in the public service. 
Just and reasonable return upon the value of the property is 
the fundamental and, as I said a moment ago, the primary step 
in the whole transaction. Without the ascertainment of that 
by some one called upon to discharge that duty, no subsequent 
steps can be taken intelligently. 

If the rate is challenged in court, the court must provide for 
an ascertainment of the value before it can determine whether 
the rate is reasonable and just or whether it is otherwise. No 
single step can be taken that will amount to anything unless 
there has been an ascertainment of the value of the property. 
I do not understand that anyone pretends to the contrary, the 
only difference here being whether it shall be intelligently made 
6922 



137 

by the Commission when that transaction forms the major 
purpose of the investigation, or in a mere incidental manner 
through the courts upon partial investigation and hearing. Of 
course it leaves very wide room for uncertainty in decision when 
undertaken as a merely incidental issue by the courts. In suoti 
controversies the proof in the particulars must govern in its 
decision by the court. This must depend in large degree upon 
the competency of counsel engaged in preparing the case for 
hearing, the importance attached to the issue in the particular 
case, and other circumstances connected with that particular 
case The decision of the same fact of value of the same rail- 
way may therefore be decided differently on different hearings. 

This amendment ought to commend itself to those who want 
clearness instead of confusion. I think there can be no objec- 
tion on the part of anyone who favors the enactment of a rail- 
road regulation law that this matter, being of such great im- 
portance, shall be taken up deliberately and shall receive the 
very fairest attention it is possible to provide by law. I think 
the carrier ought to be heard. I think the Commission ought 
to provide the fullest investigation, and after the fullest hear- 
ing determine the fundamental question of the value of the 
property. Unless that is done there will be no step taken that 
will amount to anything more than a guess. Before the court 
will be able to say whether the rate is fair and just it must 
have an investigation made. It may be said that in the general 
direction to the Commission to fix a just and reasonable rate, 
by implication the power to fix the value of the property em- 
ployed in the service is conferred, and that that will probably 
follow. But I think this step is second only in importance to the 
fact that a rate is to be fixed, and a very full, complete, and 
minute direction should be given as to how it should be done, 
and I think it should be a preliminary step. I think we can 
in that way answer in a measure the suggestion of the Supreme 
Court and conform to the rule laid down by that tribunal. Of 
all the persons who should be interested in the adoption of this 
amendment it would seem to me that the broad court revision- 
ists are the ones who would insist that this fundamental step 
should be taken and under such circumstances as to impart to 
the ascertainment such verity that it would not thereafter be 
questioned. 

Mr. HALE. Mr. President, as the mover of the measure has 
not indicated any desire to explain it, I move to lay the amend- 
ment on the table. 

Mr. LA FOLLETTE. With the permission of the Senator 
from Maine, I will submit a few remarks to the Senate. 

Mr. HALE. It is not for me to permit the Senator. I 
stated, and I renew it, that if the Senator himself who offered 
the amendment desires to explain it I will not insist, until after 
he has left the floor, upon my motion. But I shall then make 
the motion and have it submitted to the Senate. I am not dis- 
criminating for or against the Senator personally. He has 
offered the amendment, and I am willing to withhold my motion 
until he, having offered the amendment, explains it under the 
rule as he desires. Then I shall ask recognition from the Chair 
for my motion. 

Mr. LA FOLLETTE. Mr. President, I was not aware that 
any Senator upon this floor, by serving notice upon the Senate 

6922 



138 

that he proposed to move to lay an amendment on the table, 
could foreclose all other Senators from even rising and asking 
for recognition to discuss the amendment. I knew that the 
Senator from Arkansas [Mr. Clarke] desired to speak upon 
this amendment ; I know that other Senators desire to speak 
upon it, for they so indicated to me. For that reason I waited, 
after the Senator from Arkansas [Mr. Clarke] took his seat, 
to see whether others desired to speak before I rose. Before 
any other Senator could secure recognition the Senator from 
Maine [Mr. Hale] interposed his motion for the purpose of pre- 
venting debate. 

Mr. President, I can not be quite indifferent to the fact 
that the distinguished Senator from Maine [Mr. Hale] has ap- 
plied his motion to table the amendments so far, I believe, in the 
debate, which were offered by myself, with one exception, and 
that was the amendment offered by the Senator from Mississippi 
[Mr. McLaurin], which was so near akin to one I had offered 
that the Senator from Maine [Mr. Hale] doubtless felt con- 
strained to make his motion, in that case, merely to be con- 
sistent. 

Mr. President, I will say, that while I remain a member 
of the Senate, there will never again be unanimous consent 
given for the adoption of such a rule as that under which we 
are proceeding which does not permit a vote to be taken directly 
upon the amendments as a part of the unanimous-consent agree- 
ment — excluding the motion to table. 

Mr. President, with respect to the amendment which is be- 
fore the Senate, I have to say .just this : It is the foundation of 
any legislation that is to be effective to secure reasonable rates 
that there shall be a valuation of the railroad property of this 
country. In support of that I call the attention of the Senate 
to the following language of the Supreme Court : 

The utmost that any corporation operating a public highway can 
rightfully demand at the hands of the legislature when exerting its 
general power is that it receives what, under all the circumstances, is 
such compensation for the use of its property as will be just both to it 
and to the public. 

And then, Mr. President, they went on and laid down for the 
consideration of every legislative, administrative, or judicial 
body that should deal with this question, a method of as- 
certaining what rate would be just both to the public and to tne 
public-service corporation, and in defining the basis upon which 
reasonable rates must be fixed they said this : 

If a railroad corporation has bonded its property for an amount that 
exceeds in its fair value, or if its capitalization is largely fictitious, it 
may not impose upon the public the burden of such increased rates as 
may be required for the purpose of realizing profits upon such exces- 
sive valuation or fictitious capitalization. 

They said further : 

If a corporation can not maint&in such a highway and earn divi- 
dends for stockholders, it is a misfortune for it and them, which the 
Constitution does not require to be remedied by imposing unjust bur- 
dens upon the public. 

Now, sir, with respect to the vital importance of this valua- 
tion before any commission or any legislative or any judicial 
tribunal can fix a reasonable rate, I wish to call attention to 
the language of the Interstate Commerce Commission, sub- 
mitted to this body in its report for 1903. That was quite 
recently ; and at that time, in urging upon Congress the im- 
6922 



139 

portance of authorizing the Commission to make a valuation 
of railway property, they said : 

Among the subjects which deserve the attention of Congress Is the 
need of a trustworthy valuation of railway property. 

******* 

A large number of questions incident to the valuation of railway 
properties suggest themselves in addition to those which have been 
mentioned. This report can not, however, enter into further detail. 
Sufficient has been said to indicate the importance of an authoritative 
determination of railway values. It is respectfully recommended that 
Congress take this matter under advisement with a view to such legis- 
lative action as may be deemed appropriate. 

They said, further, these important words with respect to the 
valuation of railway property : 

No tribunal upon which the duty may be imposed, whether legisla- 
tive, administrative, or judicial, can pass a satisfactory judgment upon 
the reasonableness of railway rates without taking into account the 
value of railway property. 

Now, what is it proposed to do by this legislation? Is it pro- 
posed to give to the people of this country reasonable rates? 
Will anyone contend on this floor that the public is not entitled 
to reasonable rates? Will anyone contend that the railroad 
companies, the common carriers of this country, are entitled to 
more than reasonable rates? If the reasonable rate is that 
which does justice to the public and justice to the common car- 
rier — and if it is desired to have justice done to the public and 
to the carrier — then why not incorporate in this legislation the 
means Of enabling the Commission to ascertain the reasonable 
rate? You have not yet done it. You will never do it until you 
adopt an amendment authorizing and requiring the Commission 
to make a valuation of the property of every railway company 
subject to the provisions of this act. 

With respect to this proposition, the Chicago Record-Herald 
had this to say editorially : 

There is one feature * * * which is bound to be pressed, no 
matter what laws are enacted this year. That is for the valuation of 
railroad property. The Interstate Commerce Commission has asked 
the power. The convention of railroad commissioners in Washington 
a month ago voted unanimously in favor of it. Many States which 
are struggling with the assessment of railroad property would be in- 
terested in it. Whether in connection with proposals for broader 
rate-making legislation or entirely apart from such a movement, we 
are certain to hear a good deal more of it in the future. 

The Chicago Tribune had this to say editorially with refer- 
ence to the proposition which is now before the Senate: 

It is obvious that both the Interstate Commerce Commission and 
the Senator from Wisconsin are correct in affirming that no intelligent 
regulation of rates can be carried out without a knowledge of the real 
value of the physical value of the railroads. To expect that Com- 
mission to fix rates or the courts to review them without such valua- 
tion would be to repeat Pharaoh's old demand for bricks without straw. 
To make the proposed appraisement would cost some millions and some 
time, but effective public rate regulation by the Interstate Commerce 
Commission — such regulation as would be likely to stand the test of 
judicial review — implies and requires that the appraisement be made. 

Now, I say to Senators here that the only justification which 
you can offer for a vote against this amendment is that it is not the 
purpose to pass a bill here to enable the Commission to institute 
any efficient regulation of railways or to defend in the courts 
the reasonableness of a single rate or regulation which it may 
seek to establish. But if it is the purpose to so empower the 
Commission, provision must be made for the valuation of rail- 
way property, because when the Commission fixes its rates and 

6922 



140 

the railroad company resists those rates, the question which 
will be raised is whether the rates as established will yield a 
fair return upon the fair value of the property of the railroad 
company. If the rate will not yield such return it can not 
stand. Whether the Commission can maintain its rates or not 
will depend upon its ability to show in the court that the rates 
which they have established do yield a fair return upon the 
fair value of the railroad property. Clearly, it can not do this 
unless it knows what is the fair value of that property. 

Now, I undertake to say that the bill which is before the 
Senate does not provide for ascertaining a reasonable rate upon 
the basis fixed by the Supreme Court. 

It certainly does not profess to provide for fixing reasonable 
rates. It provides only that the Commission may fix maximum 
rates, but it provides no means by which the Commission can 
ascertain whether the rate which is fixed as a maximum is a 
just and reasonable maximum rate. Until the Commission is 
authorized to make, and does make, a true valuation of railway 
property, it can never make it clear to the court that the max- 
imum rate which it establishes is a reasonable maximum rate. 

I insist, Mr. President, that this is a bill for the benefit of 
the shipper, who does not really pay the charges. It aims only 
to clotfie the Commission with power to ascertain whether rates 
are relatively equal between shippers. It provides that, upon 
complaint, the Commission may prescribe such rates. But the 
only standard of comparison by which the Commission can be 
guided in its effort to fix rates is the standard set by other rates 
made by the railroads, and the reasonableness of which is 
known only to the railroads. 

The VICE-PRESIDENT. The Senator's time has expired. 

Mr. HALE. I move to lay the amendment on the table. 

The VICE-PRESIDENT. The question is on agreeing to the 
motion of the Senator from Maine [Mr. Hale] to lay on the 
table the amendment proposed by the Senator from Wisconsin 
[Mr. La Follette]. 

Mr. HALE. On that I ask for the yeas and nays. 

The yeas and nays were ordered ; and the Secretary proceeded 
to call the roll. 

Mr. SPOONER (when his name was called). I again an- 
nounce my pair with the Senator from Tennessee [Mr. Car- 
mack], who is absent. If I were at liberty to vote I should 
vote " yea." 

The roll call was concluded. 

Mr. ALLISON. Has the senior Senator from Alabama [Mr. 
Morgan] voted. 

The VICE-PRESIDENT. He has not. 

Mr. ALLISON. I am paired with that Senator. If he were 
present I should vote " yea." 

The result was announced — yeas 40, nays 27, as follows : 
YEAS — 40. 
Aldrich Cullom 

Alger Dick 

Allee Dillingham 

Ankeny Dryden 

Brandegee Flint 

Bulkeley Foraker 

Burnham Frye 

Carter Fulton 

Clark, Wyo. Gallinger 

Crane Hale 

6922 



Hansbrough 


Millard 


Hemenway 


Nelson 


Hopkins 


Nixon 


Kean 


Penrose 


Kittredge 


Perkins 


Knox 


Piles 


Lodge 


Piatt 


Long 


Scott 


McCumber 


Sutherland 


McEnery 


Wetmore 



141 







NAYS— 27. 




Bacon 


Culberson 


Gearin 


Overman 


Bailey 


Dolliver 


La Follette 


Simmons 


Berry 


Dubois 


Latimer 


Taliaferro 


Blackburn 


Elkins 


McCreary 


Teller 


Burkett 


Foster 


McLaurin 


Tillman 


Clarke, Ark. 


Frazier 


Mai lory 


Warner 


Clay 


Gamble 


Newlands 






NOT VOTING— 22. 




Allison 


Clark, Mont 


Money 


Smoot 


Beveridge 


Daniel 


Morgan 


Spooner 


Burrows 


Depew 


Patterson 


Stone 


Burton 


Gorman 


Pettus 


Warren 


Car mack 


Heyburn 


Proctor 




Clapp 


Martin 


Rayner 





So Mr. La Follette's amendment was laid on the table. 



PROVIDING FOE THE BLOCK SYSTEM. 

Mr. LA FOLLETTE. I offer the amendment which I send to 
the desk. 

The VICE-PRESIDENT. The amendment proposed by the 
Senator from Wisconsin will be stated. 

The Secretary. At the end of section 7 it is proposed to add 
a new section, to be known as section 7 (a), as follows: 

Sec. 7 (a). That the Commission is authorized and empowered to re- 
quire all railroads engaged in interstate commerce as denned by this 
act to adopt the block system upon all its lines over which passenger 
trains are run prior to the 1st day of July, 1911, and the Commission 
may after reasonable notice and hearing determine and by order direct 
the portion of such line.1 upon which the block system shall be adopted 
and installed, not exceeding one-fourth oi the entire mileage of the pas- 
senger lines of such railroad in any one year. That any railroad fail- 
ing to comply with any lawful order made by the Commission hereun- 
der shall be liable to a penalty of $1,000 for each day that such failure 
continues, to be recovered in a suit to be brought in the name of the 
United States by the United States attorney in the circuit court of the 
United States having jurisdiction in the locality where such violation 
shall have occurred, and it shall be the duty of such United States at- 
torney to bring such suit upon duly verified information being lodged 
with him of such violation. For the purposes of this act the term 
" block system " shall be taken to mean the methods and rules by 
means of which the movement of railroad trains may be regulated in 
such manner that an interval of space of absolute length may at all 
time be maintained between the rear end of a train and the forward 
end of the train next following. The term shall be taken to include 
automatic block signaling, so called, but no order shall specify the 
kind of block system or make or cause any discrimination between au- 
tomatic, so called, and nonautomatic. 

Mr. LA FOLLETTE. Mr. President, scarcely a day passes 
that does not record some case of gross negligence on the part 
of a railroad company in the operation of its trains, resulting 
in collision and in the consequent destruction of the lives of 
passengers and of employees. The accidents which occur in 
the United States outnumber those of foreign countries three, 
four, five, and six to one, depending upon the country with 
which comparison is made. In the year ending June 30, 1905, 
the railroads of the United States killed and injured 10,017 pas- 
sengers and 48,487 employees. 

An instructive comparison may be made with the railroads of 
England. England has a little over 22,000 miles of road. We 
have over 200,000 miles of road. The passenger trains of 
England in 1903 traveled less than one-half the total mileage 
which the passenger trains in this country traveled, but the 

6922 



U'2 

English railroads carried twice as many passengers as were 
carried by the railroads of the United States during that year. 
It will thus be seen that the English trains were much more 
heavily loaded and followed each other much more closely in 
order to handle this traffic on their limited trackage. 

It is accepted, sir, as a rule of accidents, that they increase 
somewhat in proportion to the density of the traffic. The density 
of the English traffic as compared with the traffic in this country 
La as 6 to 1, but. notwithstanding that fact and the further 
fact that England hauled twice as many passengers with a train 
mileage less than half as great as ours, and did the work with 
only 22.000 miles of track, its railroads killed and injured in 
1003 only one-tenth of the number killed and injured by the rail- 
roads of this country in that year. England has adopted the 
block system, and requires the railroads of that country to 
operate under it 

But there is another reason, Mr. President, why the fatalities 
and injuries in this country exceed those of other countries. 
The parsimonious policy pursued by the railroad companies 
and their failure to employ a sufficient number of men to 
guard their tracks is responsible to a large extent for the ex- 
cessive number of accidents. The railroads of the United 
States kill six and a half times as many and injure twenty- 
nine times as many passengers as the Prussian railroads ; 
while the number of employees killed in the United States is 
more than three times and the number of injured more than 
twenty-five times as great, relatively, as the number killed and 
injured on the Prussian railroads. 

The significant fact that helps us to understand this differ- 
ence is that in the case of relatively the same number of miles 
of track the Prussian roads employ 636.000 men where the 
railways of the United States employ 50.000 men. 

It seems to me, Mr. President, that it is time to require the 
railroads of this country to exercise greater care for safe- 
guarding the traveling public. The adoption of the amend- 
ment which I have introduced is an important step in that 
direction. 

The VICE-PRESIDENT. The question is on agreeing to the 
amendment of the Senator from Wisconsin. 

The amendment was rejected. 

PROVIDING PROTECTION" TO RAILWAY EMPLOYEES. 

Mr. LA FOLLETTE. Mr. President. I have another amend- 
ment which I desire to offer, to come in at the end of the sec- 
tion. 

The VICE-PRESIDENT. The Secretary will state the amend- 
ment. 

The Secbetaby. On page 25, after line 2, at the end of sec- 
tion 7. it is proposed to insert a new section, to be known as 
section 20 (a), to read as follows: 

Sec. 20 (a). That every common carrier by railroad subject to the 
provisions of this act shall be liable for damages for all injuries, 
whether resulting in death or not. sustained by any of its employees, 
subject to the provisions hereinafter contained regarding contributory 
negligence on the part of the injured employee : 

a. When such injury is caused by a defect in any locomotive, engine, 
car, rail, track, roadbed, machinery, or appliance required by said com- 
mon carrier to be used by its employees in and about the business of 
their employment. 
6922 



143 

b. When such injury shall have been sustained by any officer, agent, 
servant, or employee of such common carrier while engaged in the line 
of his duty as such and which injury shall have been caused in whole 
or in greater part by the carelessness or negligence of any other em- 
ployee, officer, agent, or servant of such common carrier in the dis- 
charge of or by reason of failure to discharge his duties as such. 

In every action to recover damages for such injuries or death the 
court shall submit to the jury the question whether the employee in- 
jured or killed was guilty of contributory negligence, and shall instruct 
the jury that if they shall answer such question in the affirmative, that 
they shall then answer the following question : Was the negligence of 
the employee injured (or killed) slighter or greater as a contributing 
cause to such injury (or death) than the negligence or carelessness of 
the common carrier, or any other officer, agent, or employee of 
such common carrier? And in all cases where the jury shall find the 
carelessness or negligence of the common carrier, or any other officer, 
agent, or employee of such common carrier, was greater than the neg- 
ligence of the employee so injured or killed, and contributed in a 
greater degree to such injury or death, then the plaintiff shall be enti- 
tled to recover, and the negligence, if any, of the employee so injured 
or killed shall be no bar to such recovery, and in all cases under this 
act the questions of negligence and contributory negligence shall be for 
the jury. 

Mr. LA FOLLETTE. Mr. President, in legislation for the pro- 
tection of railway employees certain elementary facts should 
be considered. The employment is an extra hazardous one. 
From the very character of the business a railway employee is 
at the mercy of every other employee with whom he works. He 
can exercise no choice of association. He is bound to work with 
his coemployee, whatever his character. He is part of a system. 
He may be placed in great jeopardy through the carelessness of 
a fellow-servant, and yet be compelled to accept the risk, or im- 
peril others whose safety depends upon his self-sacrifice. 

The personal safety and lives of the public and the property 
of the public depend upon the fidelity and courage of men em- 
ployed in the railway service. The proper safeguarding of rail- 
way employees is a matter of public concern. It is a plain 
proposition that in proportion as the liability of the railway com- 
pany is increased, for the acts and defaults of its officers, agents, 
and employees, in that degree will be secured greater diligence 
and care upon its part, and the hazard to the public thereby les- 
sened. 

Mr. MALLORY. Mr. President 

The VICE-PRESIDENT. Does the Senator from Wisconsin 
yield to the Senator from Florida? 

Mr. LA FOLLETTE. Certainly. 

Mr. MALLORY. I should like to ask the Senator from Wis- 
consin, for my own information, as to his idea of the applica- 
tion of the terms of this amendment if it is enacted into law? 
Every accident of this kind has to occur in a State, and each 
State has its laws on the subject. Some States have passed 
laws modifying the common law on the subject. In fact most 
of them have. I should like to inquire of the Senator whether 
the amendment, as he proposes to enact.it into law, would take 
precedence of the State laws on the same subject where a rail- 
road is engaged in interstate commerce? It seems to me there 
would be a conflict necessarily if the laws differed. 

Mr. LA FOLLETTE. It would apply to injuries received in 
interstate traffic. I can take no more time, because I have 
here some matter which I wish to have presented on this ques- 
tion. It gives the history of this legislation, and I ask that the 
Secretary may read it as a part of my remarks. I may say 
6922 



144 

that the communication is from Mr. Fuller, the representative 
of the railroad organizations of the country, maintained here 
by them to look after their legislation. 

The VICE-PRESIDENT. Is there objection to the request 
of the Senator from Wisconsin that the document submitted by 
him be read by the Secretary? The Chair hears none, and the 
Secretary will read as requested. 



Mr. ELKINS. Mr. President, I think it is due the Senate to 
state that the Interstate Commerce Committee has now before 
it for consideration a bill substantially of the character of the 
amendment offered by the Senator from Wisconsin. 

It has adopted two sections of the bill. It is the House bill 
that came over some weeks ago, and was referred to the com- 
mittee. But we have not had time to conclude its consideration. 

I would ask the Senator from Wisconsin if he has seen the 
bill pending before the committee? 

Mr. LA FOLLETTE. I will say to the Senator from West 
Virginia, that I have seen the bill pending before the committee, 
and that I am informed the committee has agreed upon a report 
on the House bill. I have the House bill before me with the 
amendments which the Interstate Commerce Committee of the 
Senate have adopted to it, and those amendments practically 
eviscerate the House bill. I have them here, and should be 
glad to have them incorporated in the Record. 

Mr. ELKINS. Let me see them. [After a pause.] The 
amendments referred to by the Senator from Wisconsin and 
which have been interlined in this copy of the bill were so in- 
terlined when it was in charge of the junior Senator from 
Mississippi [Mr. McLatjrin], and the amendments which have 
been adopted were such amendments as he proposed. The 
amendments to the third section have not been considered for 
want of time. 

I think it is fair to say, although I do not know definitely, that 
the committee will agree to the House bill with perhaps one or 
two other amendments to meet this question. I have not had 
time to read the Senator's amendment which is before the Sen- 
ate. I suppose it is substantially the same. I hardly think the 
amendments take all the good out of the bill, as suggested by 
the Senator from Wisconsin. The bill as it came from the 
House with the amendments already made by the committee is 
a very good bill. I call the attention of the junior Senator 
from Mississippi to those amendments. 

Mr. LA FOLLETTE. I ask unanimous consent to have the 
bill which I sent across to the Senator from West Virginia 
printed in the Record. 

The VICE-PRESIDENT. Is there objection to the request of 
the Senator from Wisconsin? 

Mr. McLAURIN. Mr. President, I do not think it is proper to 
have the bill which the Committee on Interstate Commerce 
have under consideration printed in the Record until the com- 
mittee makes a report upon the bill. 

Mr. LA FOLLETTE. If there is objection, I will ask to have 
the bill returned to me. 

****** * 

6922 



145 



The VICE-PRESIDENT. The question is on agreeing to the 
amendment offered by the Senator from Wisconsin [Mr. La 
Follette]. 

Mr. LA FOLLETTE. On that I ask for the yeas and nays. 

The yeas and nays were ordered and the Secretary proceeded 
to call the roll. 

Mr. SPOONER (when his name was called). I announce my 
pair with the Senator from Tennessee [Mr. Carmack]. 

The roll call having been concluded, the result was an- 
nounced — yeas 28, nays 45, as follows : 







YEAS— 28. 




Bacon 


Culberson 


Kittredge 


Newlands 


Bailey 


Daniel 


La Follette 


Overman 


Berry 


Dubois 


Latimer 


Rayner 


Blackburn 


Frazier 


McCreary 


Simmons 


Burkett 


Fulton 


Mallory 


Stone 


Clarke, Ark. 


Gamble 


Martin 


Taliaferro 


Clay 


Gearin 


Morgan 
NAYS— 45. 


Teller 


Aldrich 


Cullom 


Kean 


Pettus 


Alger 


Dick 


Knox 


Piles 


Allee 


Dillingham 


Lodge 


Piatt 


Allison 


Dolliver 


Long 


Proctor 


Ankeny 


Dryden 


McCumber 


Scott 


Brandegee 


Elkins 


McEnery 


Smoot 


Bulkeley 


Flint 


McLaurin 


Sutherland 


Burnham 


Foraker 


Millard 


Warner 


Carter 


Frye 


Nelson 


Wetmore 


Clapp 


Gallinger 


Nixon 




Clark, Wyo. 


Hansbrough 


Penrose 




Crane 


Hopkins 


Perkins 






NOT VOTING— 16. 




Beveridge 


Clark, Mont. 


Hale 


Patterson 


Burrows 


Depew 


Hemenway 


Spooner 


Burton 


Foster 


Heyburn 


Tillman 


Carmack 


Gorman 


Money 


Warren 


So Mr. La Follette's amendment was rejected. 



May 18, 1906. 

BILL WILL NOT SETTLE QUESTION OF KATE LEGISLATION. 

Mr. LA FOLLETTE. Mr. President, before I record my vote 
on the final pasage of this bill I desire to enter both a denial 
and a protest. 

I deny that this bill complies with the recommendations of 
the President. 

I protest against every attempt to make it a partisan measure. 

The President, in his message in 1901, urged upon Congress 
the amendment of the interstate-commerce act, declaring in 
that message that the people of this country were entitled to 
" just rates." In 1904 he recommended such legislation as 
would insure " reasonable rates." In 1905 he recommended 
such legislation as would insure " maximum reasonable rates." 

This bill does not comply with any of the recommendations 

of the President. It will not enable the public to obtain the 

" just rates " recommended in 1901 or the reasonable rates 

recommended in 1904. It does not contain provisions that will 

6922 10 



146 

enable the Commission even to ascertain the " reasonable maxi- 
mum rates " recommended in 1905. 

I desire, sir, to protest against making this a political or 
partisan question. This has been attempted since this measure 
has been under consideration. The Senate may give it that ap- 
pearance, but it can not be made a partisan issue before the 
country. This Senate, under the lead of certain Republican 
Senators, may seek to draw party lines, but they will fail 
when they carry the question back to the people in the States. 
You can not divide the people of this country on political lines 
upon a question as to whether the public-service corporations of 
the country shall serve the people of the country fairly, equita- 
bly, reasonably, justly. 

I offered several amendments to this bill. I offeifed no amend- 
ment upon which any political question ought to have been raised 
or any party vote cast. Every amendment which I offered 
would have strengthened its provisions and made it more just 
to the shippers, the consumers, and yet not one of those amend- 
ments was unfair to the carriers of this country. 

I proposed the following amendments to this bill : 

1. To restore the penalty of imprisonment for violations of 
the interstate-commerce law. 

This amendment was defeated by a vote of 49 noes to 27 ayes. 
Forty-seven of the negative votes being those of Republican 
and two of Democratic Senators ; of the votes for the amend- 
ment, twenty-six of the Senators voting were Democrats. 

2. To strike out the two-year limitation, by the terms of which 
orders of the Commission expire two years from the time when 
such orders go into effect. 

This amendment was rejected without a roll call, the votes 
in opposition thereto coming from Republican Senators. 

3. To provide that when testimony is offered upon trial dif- 
ferent from the testimony upon which the order of the Commis- 
sion is based, testimony shall be taken by the trial court, the 
action suspended for fifteen days, the evidence certified back to 
the Commission, and the Commission given an opportunity to 
modify or revoke its former order. 

This amendment was defeated — ayes 26, noes 49. Twenty- 
five Democratic Senators voted for the amendment ; forty-eight 
Republican Senators voted against the amendment. 

4. Substitute to section 15 providing for — 

(a) Authority for the Commission to issue orders upon its 
own motion. 

Cb) To fix a maximum rate. 

(c) To fix a differential, and to prescribe both a maximum 
and a minimum rate. 

(d) To change the classification of any article. 

(e) To determine what regulation or practice in respect to 
transportation is just and reasonable. 

All Republican Senators who voted, excepting myself, voting 
against the amendment. 

5. To forbid every Federal judge who owns shares of stock 
or bonds of a common carrier subject to the provisions of this 
act, or who uses a free pass or procures for the use of others 
free passes over such railroads, from hearing or deciding any 
proceeding or presiding at any trial under the provisions of this 
act. 

6922 



147 

Laid upon the table by a vote of 40 to 27 — forty Republican 
Senators voting in the affirmative, twenty-five Democratic Sena- 
tors voting in the negative. 

6. That upon the trial of any action brought to set aside or 
modify any order made by the Commission a copy of the evi- 
dence introduced by the plaintiff shall, upon motion made on 
behalf of the Commission, be transmitted to the Commission, 
and the court shall stay further proceedings in such action for 
fifteen days from the date of such transmission that the Com- 
mission upon receipt of such evidence may alter, modify, or 
amend the same. The amended order shall take the place of the 
original order, as though made by the Commission in the first 
instance. 

The amendment was laid upon the table without debate — 
ayes 41, noes 30. Forty Republican Senators voted to lay the 
motion on the table. All Senators voting in the negative were 
Democrats excepting four. 

7. That the Commission shall estimate and ascertain the fair 
value of the property of every railroad engaged in interstate 
commerce, as defined in this act, and used by it for the con- 
venience of the public. 

Motion to lay on the table rejected by a viva voce vote. Mo- 
tion later renewed, and amendment laid on the table — ayes 40, 
noes 27. Thirty-nine Republican Senators voted to lay the 
amendment on the table. All votes against laying the amend- 
ment on the table were recorded by Democratic Senators ex- 
cepting six. 

8. To adopt the block system, insuring greater safety to the 
traveling public. Amendment rejected without roll call. All 
votes against the amendment coming from the Republican side 
of the Chamber. 

9. For the railway employers' liability amendment for the 
relief of railway employees. 

Defeated — ayes 28, noes 45. Those who voted in the affirma- 
tive were all Democrats excepting four. Of those voting against 
the amendment all were Republicans excepting three. 

There can not be offered here or before the country any satis- 
factory argument or reason against the amendments which I 
proposed. No arguments have been made or reasons offered 
against their adoption. My Republican colleagues, under the 
leadership of a few New England Senators, lined up to vote 
down those amendments in nearly every instance without expla- 
nation or justification. 

This bill, when it becomes a law, will not put this question at 
rest. It can not. When Congress merely clothes the Commis- 
sion with power to ascertain whether rates are relatively equal 
and withholds from it all authority and all means of determin- 
ing whether those rates are just and reasonable, it can not be 
expected that such inadequate legislation will solve this great 
problem and satisfy the public demand for not only equal but 
also for just and reasonable rates. 

The question which this bill should settle, but does not settle, 
will be a live issue in the next campaign for the election of men 
to both branches of Congress who will stand for a full measure 
of relief from oppressive transportation abuses. 

So long as the legislation relative to the common carriers of this 
country permits these corporations to increase their capital 
6922 



148 

stock without limit, increase it without adding anything of 
value to their properties, and increase it solely with the purpose 
of fixing rates upon that inflated capitalization, in order to pay 
profits and dividends to those holding the stocks and bonds, in 
which they have no real investment, just so long this question 
will be a vital issue before the American people. 

There is to-day in the stock and bond valuation of the rail- 
roads of this country upward of seven billions of water. If 
the American people are expected to continue to pay transporta- 
tion charges that will make a return upon that valuation, the 
temper of the people of this country is not understood here. 
Until there is invested in this Commission or some other au- 
thoritative body the power to determine the real, true valuation 
of the railroads of this country and the authority to fix rates 
so that they shall bear only a fair return upon, that fair value, 
Senators may as well understand now that you will have this 
question constantly before you. It will not be possible to sup- 
press it or keep it within the closed doors of committees for 
nine years to come. At every session, until an adequate meas- 
ure is adopted, while I remain a member of this body the de- 
mand will be made here for legislation that will insure to the 
people of every State fair treatment at the hands of the com- 
mon carriers of the country. 
6922 

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